The most important thing to know about real estate investing is that there are 3 ways to make money from owning real estate:
- Appreciation – The increase in a property’s value
- Principal Reduction – The decrease in a property’s mortgage balance
- Positive Cash Flow – The money leftover from rent payments after subtracting expenses like taxes, insurance, and repairs.
When an investor focuses only on 1 or 2 of these, they get into trouble.
For example, people who lost a lot of money with investment properties in 2008 and 2009 were too focused on appreciation.
In a housing crash, appreciation gets wiped out and replaced with depreciation.
That’s tragic to an investor whose plans depend on appreciation.
Millions of investors experienced this in 2008 and 2009.
A little known real estate secret
Would you like to know how some real estate investors continued to make money during the last real estate crash?
Smart thinking. I’ll show you…
Meet Mike. He did not get lured into depending on appreciation. He knew that game would wash up eventually.
So he made sure he was making money in ALL 3 ways from his real estate: appreciation, principal reduction, and positive cash flow.
That means he had higher standards for finding an investment property… it had to make positive cash flow each month.
Here’s what happened to Mike during the housing bust…
First, the prices of his investment properties went down. Obviously.
But what’s less obvious is that the positive cash flow of his investment properties went up.
During the housing bust, many people lost their homes to foreclosure. Their credit was ruined and they couldn’t get approved for another mortgage.
Most of them didn’t want another mortgage anyway, since it just caused them so much pain and loss.
But they still needed a roof over their heads, so…
Those people went from being homeowners to RENTERS
The pool of renters increased as a result of the housing bust.
And because there were more renters in the market after the bust than before, rent prices increased.
Mike made a smart decision
At this point (2008), Mike couldn’t make money by selling his investment properties because their prices were lower than before.
But that’s where his positive cash flow kicked in. By accepting that it was a bad time to sell, Mike was able to continue making money by holding on to his properties and receiving the positive cash flow from rents each month.
And, because there were more renters in the market, his positive cash flow went up.
Want to be like Mike?
Click here to learn more
Everything is managed for you and it’s a hands off, fully passive investment.
* This is not a guarantee of investment performance and each property deal is unique. To find out what you qualify for and the details, including pro forma financials, click the link above to request access.