Taming Alligators - Real Estate Investment Strategy

 


Visitors: 137

You might ask, “What does a real estate investment newsletter have to do with either of two crocodilians having broad heads not tapering to the snout and a special pocket in the upper jaw for reception of the enlarged lower fourth tooth?" Well…actually nothing. The alligators that I am referring to here are not the ones with the enlarged lower fourth tooth, but ones with an equally dangerous bite. The term “alligator" in the sense that that I mean refers to a real estate investment with a negative cash flow (where the expenses and debt service are greater than the income the property produces).

Most people in the crowd would suggest that in order for a property to be a viable investment it should always have a positive cash flow, but this is not necessarily true. Alligators (in the real estate investment sense) are not bad creatures as long as you have the alligator food (cash) to feed them and they don’t eat more than they are worth. In some cases, small alligators can even grow up to be very large cash cows with positive cash flows.

Several strategies exist that are effective in taming negative cash flows (some of these should not be attempted without the assistance of a skilled professional). While I will not be able to discuss them all thoroughly in this article (please give me a call or send me an e-mail if you would like more information), I can highlight a couple and describe how they work.

One simple strategy is to make sure that your alligator will, at some point in the future, actually become a cash cow (go from a negative to a positive cash flow). With this strategy, you will still need to make assumptions and work out the numbers so that you know exactly when this will occur and set aside enough alligator food (cash) to make it through the dry spell.

Another, more complex strategy is to slay (sell) other alligators (or, in some rare cases, cash cows) in your portfolio and use the remains (proceeds) to feed your alligator. This strategy is effective when you have strong evidence that the alligator you are taming will be far more valuable to you in the future than the opportunity cost of keeping the other creatures that you used for alligator food around.

Whichever strategy you choose to tame your own alligator, proceed with caution for these are very dangerous creatures; they can quickly tear through a portfolio before you know it. If properly tamed, however, some can be very valuable to you in the long run.

Richard St. Rose is the Founder, President, and Principle Broker of Epifany Properties. Throughout his successful 10 year real estate career, he has been licensed in 5 states. He personally owns and manages his multi-million dollar real estate portfolio. View his long list of accomplishments and qualifications at http://www.epifanyproper/Rich.html

(505)

Article Source:


 
Rate this Article: 
 
Real Estate REIT - Investing In Commercial Real Estate Is Easy With A Real ..
Rated 4 / 5
based on 5 votes
ArticleSlash

Related Articles:

Is This The Right Real Estate Investment Strategy For Me?

by: Mike Singh (October 06, 2006) 
(Real Estate)

Including Real Estate in Your Investment Strategy

by: Jill Kane (August 31, 2006) 
(Real Estate)

Real Estate Investment Strategy - Flipping into the Wind

by: Richard St. Rose (July 05, 2006) 
(Real Estate)

Real Estate Investment - The Multiple Variables of Strategy

by: Cynthia Lyle (June 12, 2007) 
(Investing)

The Changing Face of Your Real Estate Investment Strategy

by: Thomas Campenni (June 22, 2008) 
(Investing)

Making An Investment In Barbados Real Estate Isn't a Bad Strategy

by: Taylor White (July 10, 2012) 
(Finance/Estate Plan Trusts)

An Investment Real Estate Strategy Unknown To Most Is A Negative Amortization ..

by: Mark Barnes (May 05, 2005) 
(Investing)

Why Aren't You Using Self Directed IRA Real Estate As Another Retirement ..

by: Mike Iredale (November 05, 2008) 
(Investing)

Land, Lot & Home-site Real Estate Investment Strategy: 5 Keys to your ..

by: Doug Lasley (August 09, 2006) 
(Investing)

Real Estate REIT - Investing In Commercial Real Estate Is Easy With A Real ..

by: Dan Snyder (May 29, 2007) 
(Finance)