Your reason for investing should drive the type(s) of investment(s) you invest in. To oversimplify a bit, there are two investment strategies: building wealth and creating income. In the real world, these two strategies are not mutually exclusive. Where you are in life will influence your strategic choice.
Let’s look at an example rental house that requires no initial out of pocket investment. We’ll assume the debt on this property covers the initial renovation and all the costs of acquisition. We’ll even assume the house provides positive cash flow from the time it’s rentable—$50 each month after allowances for debt service, taxes, insurance, vacancy, maintenance, and capital replacement (big ticket items like HVAC units that can’t be expensed off in one year).
Here are a few ways to look at this opportunity: Continue reading