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Keep your eye on the BIG prize
November 24, 2007 by Benjamin Bach · Leave a Comment
Yesterday, I sat down with two investors and my mortgage broker (also an investor – read this to see why it’s so important that your professionals are also real estate investors!) to discuss their goals, and how we can help them get there.
What was really cool about these guys is that they get it; they’re investing to grow their equity, not for cash flow. Their goals are BIG, and 10 years out. I’m a big fan of long term thinking, since most people overestimate what they can do in the short term and underestimate what they can do in the long term.
Regular readers of this blog will know that many people who come through my office door are focused strictly on cash flow – they want investment property that will put an extra few hundred bucks (pre-tax and ‘murphy’s law expense’) into their pockets, even (no, especially) if they have limited funds to invest in the first place. My job is to educate them no why this may not be the path to an abundant retirement.
My personal investment strategy, which is awfully popular amongst my clients and colleagues, is to buy single family real estate (houses, townhouses, semi detached homes, condominiums etc) for the long term, and watch the capital growth occur from appreciation and principle pay down of your debt (mortgage) by your tenant (thanks buddy!).
When you’re buying single family properties, typically they won’t produce the same sort of cash flow that a multi family or student-geared property could acheive. The associated management fees and ‘headaches’ are usually reduced (at least compared to student properties), and it’s easier to find good long term tenants when you’re renting a nice home in a mostly ‘owner-occupied’ area versus one that is mainly renters (i.e. a nice condo unit vs units in a rented apartment complex). The big bonus is that residential properties tend to appreciate quicker than a multi family property, since it is not valued based on it’s income, but rather the supply and demand in the residential market at the time.
If you buy your property for $200,000 and in a few years a comparable home on the street sells for $270,000, it is likely you can now get access to the extra capital, and leverage that to buy even more real estate. If you keep doing this, eventually you have a multi million dollar real estate portfolio that produces all the cash flow you need.
The irony is that pursuing capital growth leaves you with lots of cash flow when you need it (i.e. when you don’t go into your job anymore), while pursuing cash flow while you work (and therefore have a good source of income already) may ensure you don’t have enough capital to live off of in retirement (translation: you’ll spend your golden winters in Toronto instead of the Bahamas).
I would love to talk to you about what real estate investment strategy you’re using. If you’re not using one, or are just getting started with your portfolio, I can help you put together a Financial Future Focus and a plan to help you reach your dreams.
Please call me at 519 772 4376 or 519 570 4447 and we can arrange a free, no obligation wealth building consultation. You owe it to yourself and your family to find out how you can secure your future.
Kitchener Waterloo’s Favourite Real Estate Agent (Gold Award, Kitchener Waterloo Record Readers Select Awards 2007 – 2008) wants to show you how Real Estate Investing can make you wealthy. Benjamin works with people from across Ontario and Canada, helping them build wealth through smart real estate investments.
Benjamin is hosting a FREE Millionaire Real Estate Investor workshop December 6th, 2007 from 7-8:30PM. Registration is free in advance. $5 at the door. Call or email Benjamin Bach today to register, and learn how you can start your Real Estate Investment portfolio.
Benjamin is a Sales Representative with Keller Williams Golden Triangle Realty in Kitchener Waterloo and would love to answer any questions about buying or selling a rental, income or investment property.
You can reach Benjamin at Benjamin(AT)BenjaminBach.com or call him at 519 570 4447
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