The Forever FactorThere is one often overlooked factor among investors, rehabbers, property flippers, and various other business owners that has slowly started to become a factor again. What is “the forever factor”? So many investors in real estate over the years have been so focused on renovating a property, or building a new property for that matter, and selling it to make their profit.
Until the last few years, it was a
given that you could sell that property relatively Many investment calculations take into account cash flow, return on investment and tax breaks, but when you look at these you also need to weigh out the advantages of a property that generates cash…..from now on. As we got used to being able to sell just about any property, at any time up until 2008, few investors even thought about holding a property long term.
Old school landlords and big corporate commercial property owners understand this. Although a ton of commercial properties will go through the default process over the next 3 years, because of commercial paper resets, smart companies that have been holding properties for many years are actually looking to buy. They know the type of leverage and bottom line profit dollars that long term, properly managed, real estate assets can create. Residential duplex and multifamily property owners are now dancing in the streets because of the increase in rents over the last 2 years or so. When the economy takes a dip, there are less residential buyers out there and more tenants. And there are not only more tenants, but an abundance of good tenants to choose from. Downsizing property owners that have sold their properties often look for a nice place to rent, until they regain their stability. This demand drives rents and your bottom line dollars up. The old worries about how long it takes a property to “break even” aren’t as much of a factor when profits go up and vacancies go down. If you have to sift through a tenant, chances are you have 3 or 4 waiting to get in. Screen them carefully, follow a process in rent collections that works, and you’ll find that the numbers are more attractive now than they’ve ever been.
We’ve seen
demand for residential rentals continue to rise, even as
average rent per square foot has Look at the commercial real estate firms that have actually gotten stronger during this shake up going on in the commercial paper markets. Who are the ones that don't seem to be as affected as the small firms or weaker firms? The companies that have been holding and managing long term cash flow producing properties are not only doing well, but a lot of them are now buying properties at incredible deals, which means their hold to break even point is even shorter. All of this leads to a much quicker turn-around time to break even and pay the property off. An investment like this will continue to generate cash forever with a little management and attention. Long term the property will continue to appreciate over many years while you’re enjoying the income that it generates, and The “Forever Factor” will become more and more important as it helps the rest of your assets become more seasoned and stable over time. Sandhills Area Multi-Family Properties Sandhills Area Commercial Properties Back to Real Estate Articles Back to Investors Corner
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pain
free, as long as it was priced competitively and marketed
properly, but because of the slow-down in the markets things
have changed. Property owners are starting to refocus on
what many corporate groups, hedge fund managers and “old
school” investors have been focused on for years.
“The Forever Factor.”
With the slow-down in the economy,
investors and property owners are now realizing just how
important cash flow is. Ask any seasoned investor and they
will tell you that cash flow is better than cash any day of
the week. When other parts of your business take a hit
because of economic factors, an asset that generates cash
becomes priceless. It supports all other facets of your
business.
continued to go up.
Stop and take a look at some of the strongest investors in
your local market, and compare what they have in common.
Most of them have been holding properties long term, or have
a portfolio of income producing properties that generate
cash every month. They already know about the forever factor.
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