Why do most investors leave real estate within 1 to 2 years and then just give their investment property away for 60-70% of what they bought it for? The main reason is volume and that is why so many big time investors love to see the little guy get out of investing...They get a steal of a deal!

What are some of the pitfalls that a first time investor fall into that cost them thousands? The first time investor usually goes and buys a property though their Realtor that they bought their home through. This is usually mistake number one, because their agent understands buying a home for residential purposes and doesn't understand investing home purchasing. They are two completely different home purchases and if you don't know what you are doing it can cost you the investor, thousands! Another one is they look for a home that they would want to live in, this can also cost you thousands! You are buying something to make money with, so who cares what it looks like and if you would live in it? There is a person for every home out there and if you buy a great investment at a lower price and make $50,000, do you really care what it looks like?

Let me explain how this works and why you should not sell your investment property, but you go buy more! Most beginning investors get out of real estate with in 1 to 2 years because they had a renter that was paying on time and they had positive cash flow. Then they got a bad renter who stopped paying and their positive cash flow was gone! After 3 months a savvy investor comes along and says, "I see you have had your rental vacant for 3 months, what is going on?" The new investor says "Renters didn't pay and just moved out I am just ready to get rid of this thing!" Now - What do you think the savvy investor does? He doesn't tell the new investor "No, you need to keep this property forever" he says "I can take if off your hands if you would like?" and now he has just added another home to his portfolio for 60-70% of what it is actually worth.

Now here is why you should actually keep that property and why you should actually go out and buy 3 to 100 more! If you were the savvy investor who I was working with, I would find you those rental properties that are priced 60-70% below market value. Most agents and first time investors look on the MLS and that is a mistake. The MLS is RETAIL prices and you need to find them before they get there. For $500 down you can get those properties and add them to your inventory and start making positive cash flow immediately. Use creative financing to make money on your properties and not rent them out is another technique I can show you. Click here to find out about why you shouldn't rent your properties out.

OK, let us say that you have one property that had a positive cash flow of $100 per month and your mortgage payment is $1000 per month. If you renter moves out, how much money are you losing per month? You will be losing $1000 per month until you get it rented again and that is when frustration sets in and you give your property away. The savvy investor has 15 properties all $100 positive cash flow per month with mortgage payments of $1000 per month. Each of those properties was bought with $500 down for a total of $7500. He is making $1500 a month positive cash flow and has had his down payment returned on all properties within 5 months. Here is the big question that will show you why he doesn't sell when a renter moves out and he isn't getting any rent. How much is the savvy investor losing each month if he has one person move out? The answer is ZERO. He isn't losing anything! He pays his $1000 mortgage from the positive cash flow from the other properties and he is still making $400 a month positive cash flow from the other properties.

                   $1500 a month positive cash flow x 15 properties
                  -$1,000 for mortgage payment
                  -$   100 loss of positive cash flow for vacant property
                =  +$400 positive cash flow every month

If you have just one property you would be losing $1000 a month for the mortgage payment. You can see why my investors are very happy and love to see you sell your property for 60-70% of what it is worth. They are just upping their positive cash flow.

To become a savvy investor and learn how to make money even when losing it, feel free to contact me and we will discuss your long term investment goals together.

Todd Clark - broker
Kastings & Associates
Phone: (503)524-9494
Fax: (503)622-8739

© 2009 Todd Clark - Beaverton Oregon Real Estate: Why having more investment properties in your portfolio is better than having only one