That’s right. Instructions on how to be a terrible cash flow investor are finally here. Make sure you follow all of these recommendations to ensure ultimate success!
Once you have decided cash-flow investing is the way you want to go, follow these simple guidelines and you are certain to go broke in no time at all.
Are you ready?
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
7 Guidelines for Ultimate Failure as a Cash Flow Investor
- Overpay for a property. Nothing is more amazing for losing money than paying so much for a property that the rents you collect don’t cover the expenses. And don’t think that paying cash for the property (i.e. no mortgage payment) will make it any better. You may get cash flow then but that doesn’t mean it’s not still a horrible return.
- Speculate. Oh man, be sure you only buy properties where the only returns you may potentially see will come from rent increases or general appreciation. Even cooler, be sure you are actually losing each month on your property while you wait for said rent increases and appreciation.
- Come up with the highest return possible on paper. In order to make the return on the property look as high as possible, do these things:
- Definitely don’t include estimates for vacancy and repairs because those don’t anything impressive for your spreadsheet.
- Be sure to put that magic appreciation percentage in there because that does a real number (no pun intended) on providing insanely high returns. The real estate economy is guaranteed to appreciate at exactly that rate, no?
- Buy in cities just because they are cool. Who cares what numbers look like when you can say you own a piece of property in Venice Beach, CA? You can mail those cool points to my home address!
- Buy properties just because they are cool. Definitely go for that high-end apartment that you are so enamored with the stunning marina view that you believe people will pay anything to live there.*
- Buy in cities that are declining in population. What do I always say is one of the most expensive costs on a rental property? Vacancies. What better way to keep your vacancies high than to buy in a city, or neighborhood, where no one wants to live. Score!
- Get the lowest quality tenants possible.
In case you aren’t experiencing enough vacancies to get the full experience of going broke, be sure to only accept tenants who are absolutely not qualified to live there. Maybe they don’t have a stable job, maybe their income is only just over the rent you are charging, maybe they have consistent evictions, maybe they can only afford your place because you are offering a waive of the security deposit or a free month’s rent… really the possibilities are endless. On top of that, you want to make sure these tenants are going to have no regard at all for your property and they treat it as such. Damage to walls, stains on carpets, breaking things, smoking in the house, not calling in needed repairs that will result in long-term issues, and maybe a pet or two who can thoroughly destroy your floors? You know what is even more fun than damage to the property is when the tenants leave the property with all of your appliances and/or copper wiring in tow. The more damage and theft the better!
*I was motivated for this article by an investor I recently met who claimed to be a “terrible cash flow investor”. When I asked how one earns that title exactly, he gave me some great input how to successfully be a terrible cash flow investor. Without giving out his name, I want to give credit for some of the wording I used as it is his but was so humorously worded that I didn’t want to change the phrasing.
There you have it! The keys to ultimate success in failing at investing for cash flow. I hope these guidelines help you along on your journey and please do keep me posted on your progress along the way!
Since this is the first rendition of this newfound guide to cash flow investing failure, I’m looking for more input to add to the list. From your own experience, what other guidelines can cash flow investors follow to ensure cash flow failure?