Most real estate investing strategies are focused on forced appreciation to generate lump sums of cash (fix-flip, short sales, foreclosures) and others focus on cash flow (mobile homes, low end rentals, class C Apartment buildings). While building cash reserves and having cash flows are important, they will not lead you to building significant wealth over a period of time. Real wealth is only created through strategies that harness the power of compounding.
Banks know this but for real estate investors, the only strategy that can put compounding to work is buying income property at the bottom of the real estate cycle, when it is available below replacement cost and selling at or near the peak of the cycle, while trading far above the replacement cost. In order to build the right property investment portfolio, you must be well-versed with the stages of buying and selling. [Read more…]