I am always surprised when talking to real estate investors how they respond to the question, what are you looking for in growth and appreciation investing?
The number one answer is “anything that makes sense” this way of thinking scares me and it should scare you too, if you have ever answered this question this way. It is no wonder so many investors lost it all. There are many reasons that people invest in real Estate. Believe it or not the number one answer is not cash flow it is long term growth. This is my personal favorite as well. Many people want this but do not do the diligence to get this. Sometime s we need to go out side of our comfort zones to get what we want. There is a saying “if we are always in our comfort zone you are not growing”
Why Growth? Wealth is created by growth. I mean if you have a $100k property and a $250 positive cash flow each month you have earned $3000 per in Cash flow. With a 25Year National average of a 6% appreciation your growth can generate you $$6000 per year. The next year this appreciation grows off of the new $106k price. Appreciation when purchase in the right location can always trump cash flow
Truth be told: we are in a global economy now and your backyard may not be positioned for growth. What does the person making a median income in your neighborhood need to pay for housing expense? This should be your number 1 question. A lenders standard is that the total living expense should be 28percent or less.
What if this was 15% do you know markets exist where you can live for as little as 15% for housing costs? What if you buy in markets with extra low housing costs versus median to high housing costs, which market do you suspect is most likely to grow the most and the fastest.
Consider population growth, employment growth, baby boomer appeal. Truth be told there are many many factors that can and should be considered before purchasing an investment property. There is plenty of growth (appreciation markets) out there you just need to look for them. This is why so many Foreigners invest here in the great U.S Of A