There may be a fine line between the properties that generate long term equity growth and
those that do not. Buying property for cash flow tends to be the easier analysis. If the property is structurally sound and the expenses are less than the income generated you can create cash flow. Investing for equity requires much more diligence and often this diligence is ignored altogether. You cannot afford to ignore these important pieces of diligence.
Do not make these common mistakes.
1. Fail to have an exit strategy: You want to know who your end buyer will be. How will
you sell it, how will you determine when you will sell it. How you will insure you get top
dollar for it at time of sale.
2. Fail to identify the best location. If real estate is all about location you want a property
that will give you sustainable returns. This will require a market with great growth
potential. Job and population growth.
3. Failing to identify job diversity: markets such as Detroit or Las Vegas have one industry
and when the economy becomes challenging these types of markets struggle the most.
Job diversity is key for a sustainable market. Sustainable markets mean sustainable
4. Fail to identify the path of progress: every growth market has a direction where the
progress is excelling. If the city is growing to the North then the best demand will be
properties to the north and therefore the appreciation will be strongest in the north.
Investing in the path of progress helps to increase your equity growth.
5. Failing to find the sweet spot. Every market has an area where the homes are in high
demand and yet priced low enough to generate a profit. If they are priced too high you
cannot cashflow them and if they are priced to low you will not find demand for the
rental or the end buyer. Buying in the sweet spot usually means buying a property that
is around the median price of that market.
The single strongest wealth building principal in existence today may be equity build up. Better than 90% of wealthy people have made their wealth through this principle of equity build up with real estate investing.. With such a strong and powerful objective you cannot afford to make these mistakes. They are easily avoided by being a purposeful investor.