I’ve been talking about endings with a lot of beginning duplex buyers lately.
The reason is I see many headed for the same mistake I made; making cash flow their number one goal.
In many respects, this is a good thing. I’ve always believed neither an investor nor owner occupant should ever buy a property that doesn’t make financial sense.
But once upon a time, I too had decided it was the most important criteria in my real estate purchases. So I bought a big building, without a lot of charm or character.
But it cash flowed like crazy.
When it was full.
But when vacancy rates went up, it took money out of my pocket. Seems there were 20 other buildings that looked just like it in my neighborhood; so tenants moved where the rent was low.
So I sold it. At a loss.
If I could have a real estate “do over”, that would be it.
Why? Because ultimately, it didn’t serve my long term goal.
My goal is to amass enough equity so that when I approach retirement, I can put a lot of money down on a big property, a cash flow machine, and have somebody else manage it.
Opting for cash flow right now was like not saving for retirement.
Big apartment buildings don’t appreciate the same way smaller multi-family properties do; simply because there aren’t as many buyers for them.
And I’m still working. So shouldn’t the income from my job should pay my bills?
If I could rewrite the past, I’d buy property in neighborhoods that had long histories of stability. I’d buy in places people want to live because of nearby natural and man-made amenities that enhance peoples lives. I’d buy charm, and I’d be thrilled if it simply broke even.
And that is entirely possible in this real estate market.
See, those neighborhoods will probably stay strong. Those neighborhoods will hold value. And maybe someday, they’ll even once again go up in value.
Someday. Like in 20 or 30 years. Just about the time I’m about to retire.