What should be the primary goal of a buy and hold real estate investor: equity or cash flow?
And by “equity,” I primarily mean built-in equity (i.e., buying properties under market value). Of course, if you buy a property under market value in Orange County or New York, it probably still isn’t going to cash flow. You’d either have to flip it or hold it at a loss with the hope that it appreciates.
As with most things in real estate, your primary focus depends on your situation and goals. But in this instance, for most people, most of the time, focusing on one goal is better.
Is It Better To Have Equity or Cash?
First and foremost (and something you might be wondering), why not both?
You should definitely aim for a property that has both a significant equity margin up front and good cash flow. Additionally, seek out a property in a decent area that will be relatively easy to manage and has a good likelihood of appreciating.
But like the Rolling Stones song says, “You can’t always get what you want.”
Choices have to be made, and you will need to consider one criterion or the other more significant. Generally speaking, the more important thing should be to go for built-in equity. But there is one noteworthy exception. This exception probably only applies to about 0.1% of investors, but it’s still worth a mention.
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