Debunking the Myth that All Good Investments are the Same

When it comes to real estate investing, many investors fall prey to incorrect assumptions— like using a single performance indicator to classify real estate investments (across the board), as either “good” or “bad.” However, contrary to popular belief, there’s no one-size-fits-all approach to measuring a property’s performance. In fact, the common ones like yield, cash-on-cash returns, and cap rates are only valid performance indicators, if they accurately reflect your overall goals.

Debunking Common Myth that All Real Estate Investments are the Same

 

The reality is that different types of investment homes are required for different types of goals (like how a doctor matches his diagnosis to your symptoms).  Over the years, we’ve discovered that a helpful initial step is to align investment options with our investor’s specific needs. And by doing that, we’ve noticed that there are three main buckets most investments tend to fall under:

  • High Yield – Properties that offer higher yields, due to typically lower home prices and comparable rents
  • Cash Flow – Properties that offer greater amounts of cash flow, due to higher rent and lower cost.
  • Long-term Appreciation – Investments that increase in value over time.

Which Type of Rental Property Should I Buy?

First, ask yourself what your goals are! For instance, are you looking to generate more income as soon as possible? Maybe you want to concentrate on building long-term wealth instead. Preserving your existing capital with a more conservative investing approach makes sense too. Each of these worthy goals comes with a coinciding strategy to help determine which types of properties are right for you.

Income Now

Income NowProperty Type: Higher Cash Flow

Income Now is an investment strategy that focuses on generating cash flow immediately; because we know that investors may need cash right away. When this type of strategy reflects your needs, you should focus on properties that are:

  • Likely to produce immediate returns
  • In places with lower home prices, like “B to C” neighborhoods
  • Practically rent-ready with minimal to no renovation needed

Wealth Builder

Wealth BuilderProperty Type: Higher Yield

Investors looking to build their total wealth (in order to cover future expenses like retirement or the cost of their child’s college tuition) will want to take advantage of a more balanced portfolio option. This means focusing on properties that are:

  • Appreciating over time
  • Cash flow neutral to slightly positive
  • Located in “A” neighborhoods. These tend to carry less risk for investors and feature renowned school districts, a closer proximity to amenities, and less vacancies

Wealth Protection

PRental with High Yieldroperty Type: Long-Term Appreciation

Sometimes you simply want to protect your current wealth, and therefore require a more conservative investing approach. If this sounds like you, you should invest in those properties that are:

  • Located in low-risk neighborhoods, like A or B
  • Offering higher-appreciation and more stable cash flow
  • In close proximity to both quality services and schools

Find the Property That’s Right for You

Remember: what makes a good investment is one that’s right for you. Our experienced team is available at any time to help guide your investment decisions. For a consultation to go over the properties that best suit your goals, call us at 888-276-0232 or schedule a consultation today.

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