I’m Bob Nelson, Eugene real estate investment broker, with Pacwest Real Estate Investments, and in this brief article we’re going to take a look at my favorite topic, investment property, otherwise known as cash-flow properties. This is part two in a six-part series on getting started in real estate investing.
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Cash-flow properties are properties for the purpose of being rented to another entity that would pay you rent. In turn, you use that rent in part to pay for the mortgage, property taxes, insurance, management, and invest in maintenance and repairs. What is left over is yours to keep, and may be used to fund more investments.
For those of you who are quite experienced and have a large portfolio, you may have a son or daughter, or even a grandson or granddaughter, who aren’t in that position. You may be interested in informing them about how to get into a positive cash flow situation with growing equity that would allow them a comfortable retirement when they decide to become independent of their vocational source of income.
A great way to start is by buying a house or a duplex for yourself. You’ll get owner-occupied interest rates and terms. As you potentially outgrow that property, you can sell it and take the cash and move forward into the next one, or you can make the leap and keep it. That becomes your first rental property, and from there you would continue to move forward and make your next moves, increasing the number of properties you own. It really is not difficult to take the first step.
Many people, however, don’t think in these terms. Instead, they say, “Let’s sell and get a more expensive house,” and they buy bigger and bigger houses. If you go that route, at some point you may say to yourself, “My gosh, I now have a 4,000 square foot house for myself and my partner. Each of us has 2,000 square feet!” If you find yourself in that position, it might be time to reevaluate your choices.
Bob Nelson, Eugene Commercial Real Estate Investment Broker:
I’d advise downsizing in that case and using the equity to go into a rental property where you’ve got a number of tenants that are paying you rent and causing your equity to grow even further. It’s really just a process of understanding where you’re trying to go and coming up with a game plan that works. I do that sort of thing professionally. Give me a call if you’d like.” — Bob Nelson, Eugene Oregon Commercial Real Estate Broker.
The Getting Started in Real Estate Investing Series is from the Bob Nelson and Marica Edwards “Real Estate Today ” Eugene, Oregon, radio show, which airs at 5:30 daily on KPNW.