When the market is doing well, your asset, if all goes as
planned, is increasing in value. You’re actually earning
value on the asset while effectively reducing the value of
the money you’re paying due to inflation. Second, you
will likely be able to increase the rental amount between
1%5% per year. That’s additional cash flow and value
you will be receiving yearly.
Finally, it’s important to note that this is an investment
and with any investment, there is inherent risk. No
investment is guaranteed. However, real estate is one of
the most proven, assetbased investment classes in history.
Most millionaires were either made through investing in
real estate or find large value in investing in real estate. As
you explore this investment opportunity, look for markets
that do not have super highs or super lows in market
crashes (like 2008). States affected greatly were Florida,
California and Arizona. One of the cities most notorious
for being hit hard in the crash was Las Vegas. These may
be markets to steer clear of. If a market crash occurs again,
it may cause migration out of those areas resulting in rent
losses. “Consider markets that may seem ‘boring’ like
many in the Midwest including our market – Cincinnati
and Dayton, Ohio. These have proven to weather a down
economy and not have big drops in real estate values or
population. These are the markets where you truly win.”
Eric said.
With all that being said, a down market is definitely not
the time to sell your rental properties. It’s a buy and hold
strategy. During a down market, it is always best to hold
these properties unless there is some absolute reason you
must sell. When the market begins to climb again, then you
may want to consider selling to upgrade to another
investment property in a better neighborhood or better yet,
purchase two and double your cash flow.
The best part of investing in rental properties is
investors are wealth building while cash flowing. Very few
investments offer this kind of opportunity. With a buy and
hold strategy, you are receiving the benefit of monthly cash
flow while also building a portfolio of tangible assets that
will always – no matter the market – have value. “If you
have the right plan, with a decent amount to invest, you
can quickly scale up to a very healthy portfolio. We
worked with a dentist who had $400K to invest and
wanted to receive $10,000 a month in cash flow so he
could retire. We built a plan and got him to his goal in
three and a half years. He was able to retire early.
However, not only did he keep receiving the cash flow
each month, now he has tangible assets that he can sell off
if he ever needed to and can pass on to his children and
grandchildren,” Dani Lynn Robison, CoFounder of
Freedom Real Estate Group stated.
Something else to consider is how you are using the
power of inflation to your advantage. Most 401k plans
aren’t able to keep up with inflation. With the small
returns and high managements fees, unless you are able to
Diversification is the key to weathering a down turn in
invest a lot in those funds, you may not even be able to
the market. More specifically, investing in buy and hold
keep up with the rate of inflation. However, with rental
rental properties not only is a proven strategy to survive
property, you are working with inflation to win in two
and even thrive in a down market, but one that holds
ways. First, your mortgage payment doesn’t change. Let’s
many positive attributes such as consistent cash flow,
say when you purchased the property it was a $500 per
numerous tax benefits, and true wealth building.
month payment. If the market tanks, it’s still a $500
payment on a fixed rate loan. If the market is great, same
36
payment.