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The Importance of Real Estate Investment Strategy

Greetings Investors!
We hope that you have had another successful and profitable year.  This is also the end of a decade which makes it at even more important time to reflect on the big picture to make sure that everything you are doing is in line with your overall mission.  But the planning for your entire life is a topic that we wouldn’t dare cover in this little real estate investment advice blog!  The planning of a Real Estate Investment Investment Portfolio however is right up our alley so we figured we would share a few things we have learned…

Goals…Something Personal
People get into Real Estate Investment for many different reasons but most tend to have something to do with securing long term wealth and short term cash flow.  The most important decision you need to make is which of these matters more to you.  If you desire immediate higher cash flows then you will want to look for properties at a lower price point that may not appreciate as well but that will produce cash quickly.  Condos and multi-family units tend to fit this approach better.  Of course it is also possible to balance your approach but deciding on which is more important will help you to make strategic decisions.

We talk a lot here about treating your Real Estate Investment Portfolio like a business and that definitely applies when crafting your strategy.  Many successful businesses fail because they grow too quickly.  They try to take advantage of momentum or get caught up in short term profits and forget to plan for emergencies, disasters or downturns.  The same can be said for your portfolio.  If you buy too many properties without having the time or resources to properly manage them then they may actually begin to lose money due to lack of repairs or tenant issues.  Of course a professional property management company (we know a great one) will go along way in helping you manage multiple properties but at the end of the day you still need to make final decisions and if you have too many plates in the air at once your entire business could suffer.  Instead opt to grow at a manageable pace.  Planning to purchase properties on a regular basis is important but you should also be open to great opportunities that may pop up.

Just as in the stock market diversifying your real estate portfolio is an excellent hedge against unforeseen circumstances.  It is important to have a few different types of properties early on so you can determine which you prefer.  Too many times investors purchase multiple units in the same building or area leaving them vulnerable to a crash of either natural or man made causes.  We managed several properties for an investor in a complex in Lauderhill when Hurricane Wilma came through in 2005.  The storm caused significant damage to the entire complex and all 6 of the investors properties were designated as unlivable.  The investor did not have other properties elsewhwere and was forced to sell the ones he had because he could no longer afford to keep them without ongoing income.

Above all the most important thing is that you have a plan.  Be prepared and failure will not be an option.  If you have any questions about this or any of our other articles please contact us at 305-517-3900.  Otherwise we look forward to seeing you next decade!

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