All Forum Posts by: Jovanny Espinal

If you payoff the car, can you use that money to make you more money?  The key thing here is opportunity cost & the future value of your money.  

If you take $20,000 and payoff the car, that is the end - car is paid off & it will depreciate, without making you any money.

Our average return on investment is 87%, that means that if we put $20k in, we get the $20k plus an average of another $17,400 back...  

Your decision hinges on opportunity cost & future value of your money.

Hello @Issac Chang,

I believe that if the property does not generate a positive cash flow from day one, do not buy it. If you do, you just paid a lot of money to lose money in the hope that in the future you might make money.

“Live where you like but invest where you can make money.” …David Lindahl

The next question is where to invest. I believe every location/property must meet the following criteria.

• Sustained profitability - The property must generate a positive cash flow today and into the foreseeable future.
• Likely to appreciate - Unless the price and rent increase at or above the rate of inflation, your present value return and income are actually declining.
• Located in an area where you can make money and business risks are low.

Below is a diagram showing the process I would follow:

There are a lot of topics covered in the above diagram that it’s impossible to discuss them all here. So I will narrow my comments to the location, the Investment Team, and buying turnkey.

Location

With an almost infinite number of places you could invest, I recommend narrowing your location search based on the following criteria.

• Population > 1M - Smaller cities may be too dependent on a single industry or employer. Here is a list from Wikipedia.
• Crime - High levels of crime and long term profitability do not go together. NeighborhoodScout publishes a list of the 100 most dangerous cities in the US. I recommend excluding any city on this list because they are unlikely to get new jobs or grow in population.
• Appreciation - Unless properties consistently appreciate at or above the rate of inflation, your actual income is declining over time. Google for the areas you are considering. NeighborhoodScout generally has good information.
• Rising per capita income - If per capita incomes are rising, job quality and quantity are increasing. The St Louis Federal Reserve is a good source of such information. For example, here is the per capita income for Las Vegas.
• Increasing population - If the population is increasing, it is very likely that the location is doing well overall. The Census Bureau has good data.
• Finally, choose a place that you would like to visit. You may need to go there at some point and it would be nice if it is a desirable location.

Investment Team

With the right investment team in place it does not matter where you invest. However, it is important that you have the right expectations as to what the team members can provide. Below is a table showing what expertise you want team members to have.

The most important team member is the property manager.