Rules to Investing

Rule #1: Buy to hold forever. Buying for the short-term means that you have to be able to predict markets. The rich buy and never sell

Rule #2: No negative cash flow. It costs about 40% of market rents to runĀ a building effectively. If you own an “alligator”, you must be depending on appreciation – so see rule #1

Rule #3: No adjustable or variable note mortgages. They go up and cause negative cash flow. See rule #2

Rule #4: No balloon payments. They cause you to have to re-finance in an unknown mortgage market, and you will be stuck with a variable loan. See rule #3

Rule #5: Buy in areas where you don’t have to collect rents with a gun. Who needs the pain?

Rule #6: Buy local. When you buy out of state, you are going to pay $45 to change a light bulb

Buying Another Home for an Investment

For most people, the largest investment that they ever make is their home. If you were to look back at what you paid for your home and what it is worth today, you’ll probably agree that it has been an amazing investment.

The good experience of having a single-family home increase in value at a rate that exceeds inflation and most other types of investments is exactly why you should consider an additional home to be used as rental property in your investment portfolio.