Why Location, Location, Location is Wrong
Location is important but it’s not the most important thing in real estate or property investing. Why is that?
If you just focus on the location, what’s going to happen? You could find a really good property in a really good location. As fantastic as that is, what happens when the market moves on you? What happens if you can’t sell when you want to?
Then the location doesn’t matter. You’re stuck in an investment you don’t want.
What’s more important?
Cash Flow, Cash Flow, Cash Flow
Markets go up and down. That means that you could be in a position where you buy property and the market moves and you have to hold it for some time.
If you’re buying a property with the goal of speculation, you could lose money holding it or selling it. You’ll be in a lose-lose situation.
Being successful in real estate means holding property for a long time. If you’re able to hold the property for a long time, you will make money.
You need cash flow to be able to hold properties over the long term.
Let’s say your income is 1.3 times your expenses. Your income is $1,300 a month and your expenses are $1,000. That’s a safe enough bet. In this situation, even if the market turns on you, you’re going to be okay. You’re going to survive.
A 2:1 ratio is even better. You’ll be very safe if your income is double your expenses. It significantly reduces the risk of your investments.
The Number One Question
Will this property make me money?
Obviously, you need to be in a good location. But that’s secondary.
If it’s in a good location but doesn’t give you cash flow, it is a bad deal. That’s why location, location, location is wrong.