A Real Estate Investing Strategy that Works in ANY Market

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One thing that the last several years has taught us is that financial markets can go up and they can go down. The real estate market is no different. When markets go up, everyone is happy and even bad investments can turn out okay. When markets go down, investors who used the wrong real estate investing strategy at the wrong time can get wiped out. Down times separate the good real estate investors from the bad or just lucky investors.

Have you ever turned on the television on a Saturday morning to one of those home flipping shows and thought to yourself, “That guy made every mistake in the book and still made money. I can do better than that.” Next, you ran out to purchase a home to flip and lost a small fortune when your home sat on the market for 6 months or more. If that was you, don’t worry, you are not alone. It happened to millions of Americans who got caught when the economy turned from a seller’s to a buyer’s market.

You probably thought to yourself, “What did I do wrong?” I know I have. The problem wasn’t that you didn’t buy and fix up the property properly, you technically did everything right. The problem started before you bought the property and you probably didn’t even know it. The problem was that you were using a strategy that works best when the market goes up, and it changed on you.

Be Flexible with your Strategy

Back when we built single family homes, we ran into the same problem. If the economy was strong when we were ready to sell, we made money. But, when the market started to slow our profits were eaten up by carrying costs as homes took longer to sell. Profits were also eaten up by price reductions needed to get the home sold. During construction the economy changed from a seller’s to a buyer’s market and our investing strategies had to change with it.

No longer can you only have investment strategies that just work when the market appreciates. You must have an investment strategy that works whether the market goes up or down if you want to be a successful real estate investor and be around for the long-term.

The perfect strategy for real estate investing in any market does the following:

  1. Provides income on a monthly basis as well as when you sell
  2. Allows you to hold the investment indefinitely regardless of economic conditions
  3. Insulates your investment property value in economic downturns
  4. Allows you to still take advantage of appreciation when the market increases

Fortunately, there is a real estate investment strategy that does provide for all four of these key aspects that works in any market. It’s called investing in cash flow producing investment real estate. This can be in the form of single family rental homes, retail, industrial, or multifamily. It doesn’t matter which type you choose as long as you invest for cash flow and base your offers on the income that the property generates.

Investing for cash flow allows you to make money regardless of the upward or downward swings in the economy. It allows you to cash monthly checks that give you the freedom to hold the property indefinitely. As long as it is cash flow positive you never have to sell. This allows you to wait out downward swings in the economy where the overall property value might be down, but the overall value only matters if you have to sell. Cash flow makes it possible for you to wait out the down market while still cashing checks and sell your property for a gain once the economy rebounds. It allows you to still take advantage of upswings in the economy because you can pick and choose the optimal time to sell. This gives you freedom and power as a property owner.

The last few years has taught us a great deal about real estate investing and the strategies we use. You can no longer rely on the old thought process that real estate always goes up. Instead, you must prepare for the worst, but set yourself up to take advantage of the best. Empower yourself to make money regardless of what happens in the economy. Using this strategy can make you a fortune in real estate investing. It will also allow you to not sweat what happens on a day to day basis in the markets. Instead, you can go on that vacation, sip that umbrella drink, and know that you will be okay either way.

About Author

Spencer Cullor

Spencer Cullor has spent the last 10 years as a real estate investor and currently owns single family, multifamily apartments, and commercial properties with his investment partners. Currently he is the Director of Acquisitions and Principal of ApartmentVestors, a multifamily real estate investment company.

7 Comments

  1. Spencer –

    This is a vital part of the equation that so many people miss especially when they are just starting out. In appreciating markets, it used to be that you assumed the rents would go up, therefore if the cash flow was a little slim in the beginining, you would still be ok; that you would be able to increase the rents steadily as time went on. When the market changed, so many people found out that this assumption put their portfolio’s in jeapordy. You are right when you say that if your cash flow is good, you can wait the market out.

  2. Good article Spencer,

    Talking about cash-flow isn’t as sexy as talking about make $1,000,000 in a month with 1 deal, but it is realistic and essential to an investor’s long-term vision. It is import to have cash, don’t get me wrong there. I have made a living by making inexpensive mobile homes cash-flow for the last 10 years. During that time I have met a few wholesalers and “flippers” (back in the day) that remarked they would rather have passive cash-flow every month then work every month for continually turn deals.

    Keep it up!
    John

    • You’re right, talking about cash flow investing isn’t as sexy as talking about making big money fast. However, you can still make those $1Million dollar paydays, you just take way less risk getting there. Thank you for your comments and happy investing.

  3. Well said!

    We only buy properties that cash flow on the day we close. We never speculate, never hope for future appreciation (thank goodness that wasn’t our strategy!).

    Yup – buy right, cashflow, hold for the long term and sell when you want at an appreciated value.

    We leased out 4 properties today. Life is good! Owning real estate is great!

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