INVESTMENT APPROACH
Investing for the long-term. It's a concept that our father describes as the "Golden Goose Rule" to real estate.
Here are the two pillars:
Cash Flow: In real estate investing there is one primary source of revenue: rental income. Pricing your apartments or retail spaces competitively is an important starting point. Location, features, amenities, and management are all influencing factors that will determine how much income you can expect to generate from your investment. Cash flow must cover all expenses including the mortgage, maintenance, building improvements, utilities, taxes, insurance, and so on. Expenses are like a juggling match: keep them to a level that protects profitability but spend enough to attract (and retain) good, stable tenants. Additionally, it is critical to budget reserves for unforeseen circumstances and capital improvements.
Equity Buildup: Equity is built in real estate in two ways (and often time simultaneously). First, equity increases when the principal balance due on the mortgage goes down. Early in the amortization schedule most of the mortgage payment is applied toward interest. So to build equity more rapidly we recommend reinvesting a portion of profits back into the property by making payments toward additional principal. Secondly, market trends can play a huge role in equity buildup. When real estate increases in value the investor builds wealth by holding the property over time. To quote U.S. Open tennis champ Andy Roddick, "With real estate, if you wait long enough, you look smarter 10 or 12 years later." We totally agree!
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