A novice real estate investor may think the only way to make a profit on their investment is in buying low and selling high – appreciation … and although this is a definite way many investors make money, it’s not the only one.
If you are only buying Real Estate with the intention of it going up in value, you will eventually pay the price when markets correct, as so many have learned these past few years … especially in Alberta. Yes, you can make money if you get lucky in a hot market, but also lose just as much on the other side.
However, if you approach your investment from the long term growth side, making sure you buy a self-sustaining property WITH cash flow after all expenses and a buffer built in, you will benefit from the compounding growth in the long run.
This is the reason I personally don’t panic when markets ‘correct’. My properties still bring in cash flow while the debt continues to shrink. Sure it may be WORTH less than last year, but who cares, I’m not selling today anyway.
Buying for long term and in the correct market gives you four income streams:
- Positive monthly cash flow
- Mortgage loan reduction
- Tax advantages / deductions
My intention is to never sell my properties, but if ONE day the market decides to throw me a bone, you never know!