Cash Flow or Capital Gains in Real Estate Investments
Which is better in today’s market? Cash Flow Objectives or Quick Capital Gains?
Several years ago when the market was high, it was easy to buy a few properties, hang onto them for a few years and then flip them for quite a decent profit. Today, having that objective may be a lot farther down on the list. While this topic has been debated among investors and real estate mentors alike, the choice for property investors now is to discover what makes the most sense financially; cash flow now or capital gains appreciation later?
An investor looks at the long-term capital gains by investing in property that provides a cash flow on a monthly basis. Those looking for a short-term capital gain within an active market may also be considered more of a trader rather than an investor; trading one property for another in the hopes of gaining a profit along the way. Simultaneously, both seek to gain a profit in the long run either by building slowly or with an initial profit when the property sells.
Buying to sell is an active participant job for an investor. One must be diligent in finding the right properties, investing the right amount of funds, being cautious on their expenditures, and reselling within their profit margin. As one of the Seven Habits of Highly Effective People, begin with the end in mind. Determine what you want long-term to make a decision on how to invest today. Taking good quality investments and having them work monthly for you may offer you a better rate of return then the short-term capital game of buying and selling.
Cash flow investing is quite different. Investors purchase a property in order to gain monthly income rather than fix up, flip, and sell for a larger one-time profit. The management is typically much less than a trading or short-term investment option even if the investor chooses to manage and monitor the portfolio themselves.
Cash flow property investing takes on the responsibility of the right property at the right time in the right neighborhood for the right price and then extends those payments by allowing themselves a monthly cash flow from the rental of that property. This is all that is to be monitored and managed each month. A short-term capital gains investor needs to find the right property at the right price that allows for the right rate of return and resale within a year or two. This is much riskier since the investor has no idea what the market will do in that short period of time. There’s more of a risk of loss for this short-term capital gain whereas the cash flow investor can continue to increase their income each month while waiting on the right time to sell, if that’s in the long-term plan.
For more information on cash flow investment properties in Louisville that meet your monthly income requirements for investing, Call our office today and let’s discuss the options that may be available to you.