Real Estate Investing London Ontario
When investing in income properties in London, Ontario, do you look at cash flow only or do you look at just the purchase price or consider both?
A silly question?
I work with a lot of investors, and it amazes me that when considering cash flow, their numbers and mine do not match! Positive cash flow is essential but based on what?
Think about that; some only take their mortgage payments, the property tax and then arbitrary numbers for vacancies, repairs, maintenance etc. What about the amount that your tenants are paying down on your principal every month? Should that be taken into consideration, even though it is not ‘cash.’
What about the price of the property? Over 15-20 years, is $10,000 or $50,000 really matter? Some say yes, some say no, so let me ask you a question: Pick a property that sold 20 years ago, add up the income and the value of the property today, did it matter what you paid for it?
Contrarian thinking or not? Two of the richest men in the world do not believe so, Warren Buffet being one and the other, Ray Kroc.
I know what you are thinking; I am not going to overpay. I don’t blame you, last week I showed seven income properties, and I felt that 5 of them were priced 10-15% too high! Is the seller greedy, unrealistic or a numbers person?
Time will tell, but for long term investors, time is on your side, not the seller. Wealthy real estate owners never sell, they are in for the long run, the fortunate thing is that it is boring and so dull, most do not get it!