For any investor, there is one type of property that is a must-have for your portfolio. But, what is it?
Let’s say that you want to build a portfolio in residential rental units. You have heard the market is great in this area, and you see your friends making a great living at real estate. You’re excited for what lays ahead.
In terms of your portfolio, what property you choose for it should be guided by two things. The first point you always must consider is cash flow and the second is how quickly the property will help you reach your end goals with as minimal a risk as possible.
Essentially, this means that your ideal property for your portfolio will be one with a net income potential that provides you enough cash flow to move you quickly to your end goal. If rents are $40,000 per year, and your expenses are $36,000 per year, then that leaves you a $4,000 per year cash flow. Is that enough cash flow to get you to your end goal, whatever that may be?
Stop focusing on how beautiful a property is, whether you like the neighborhood it’s in or its possible appreciation in value. Instead, your focus ought to be on whether the financials make sense and will help you reach your final goal. That describes the ideal property for your portfolio.