Selecting The Right Investment Property

This topic alone could fill up an entire textbook. Simply put, it comes down to deciding what your investment goals are and then selecting a house that will meet those goals.

As you’ve probably heard: buying real estate starts with “location, location, location.” We all seek property with the best schools, the best views, and the best chance for appreciation. This strategy, while potentially lucrative, may have a dark side as well. History has taught us that deflation can have a crippling effect on appreciation, especially if the property and location you have chosen carries the burden of negative cash flow or “negative gearing” (a term is used in many parts of the world).

We believe that positive cash flow is the best path to real estate success for several reasons. First, positive cash flow means that money generated from leasing out your investment property should allow you to receive income from your property or pay off your mortgage if the income is not currently needed. Paying off a mortgage in the earlier stages of life will provide substantial income later in life. Another benefit is that rental income is passive and not subject to the same taxes as ordinary income, which adds more spendable money to your bank account.

Best of all, cash-flowing properties offer the possibility of winning the appreciation sweepstakes plus having the cash flow. Remember, you are not residing at the property. It is simply the vehicle you are using to reach your destination: long-term financial rewards and a more secure retirement!

– Bert Miller, Principal & Advisor, Rent To Reward