What makes a property a good investment? Is it a certain percentage of positive cash flow? Is it meeting or beating a numeric ratio? Is it buying a property at something less than the perceived market value?
The answer is — it depends.
An investor needs to know where they want to go with their investments. What they hope to achieve. When an investor knows what they hope to accomplish they have a personal set of guidelines for what makes a good investment for them.
The BawldGuy talks a lot about Purposeful Planning. A Purposeful Plan starts with knowing what you want out of your investments. An investor’s goals or plan can be very simple or complex, but it should be well thought out.
For many investors real estate is a way to build wealth for retirement. For others real estate is a way to quit their day jobs. Some want to be actively involved in their investments. Others need investments that can almost run themselves.
For someone looking to build a solid retirement, current year returns become less important. The goal becomes maximizing the income that can be used in the retirement years. Market trends become far more important. Potential appreciation becomes more important. It becomes increasingly more important that a property be well built as to minimize repairs and maintenance issues.
Investors who have little time for their investments will need solid advisors. It becomes important to insure that your advisors know your goals and have the expertise and knowledge to meet your goals.
Once you know where you want to go you’ll find that there are many ways to get there. Finding solid real estate that you can hold onto forever is one way of getting there. Finding properties that you might want to hold for 3 – 5 years, another approach. Some choose to find properties that have potential for forced appreciation.
Knowing where you are going helps you as an investor to make better choices and clarifies what is a good investment.