Homebuyers or, new investors that buy real estate solely on the basis that they are hoping it will appreciate in value are speculating and not really investing. They are simply gambling that the property value will increase over time.
True investors are more concerned about Cash Flow than they are about Capital Appreciation. Capital Appreciation will increase over time since it is tied to inflation however, it will not carry you through the down markets. Those investors that purchase properties that can generate a high Cash-on-Cash yield will do very well in both up and down markets.
Cash-on-Cash yield is the percentage of return you would get if you paid cash for a property. Your initial cash investment comes back to you through the rental income your properties generate over a given period of time.
Before buying any property as an investment it is critical to work the numbers and see if the property matches your investment guidelines and criteria.
Find a knowledgeable Realtor® that can work with you who knows about calculating cash flows, cash-on-cash yield, vacancy rates, the rental market, and the best areas for you to invest in based upon demographic data. Their service can become invaluable to your real estate investment portfolio.
-Keith
Keith M. Elliott Jr.
Realtor®, ABR®, e-PRO®, SRES®
Commercial Specialist®
Candidate Member of CCIM Institute
RE/MAX Olympic
15100 Washington Street
Haymarket, VA 20169
Office: (703) 754-4341
Cell: 540-272-9012
Fax: (571) 261-5048
Email: kelliott@comcast.net
Blog: http://www.activerain.com/kelliott5264
Website: http://www.MyRealtorKeith.com