I have traveled the country preaching that you DO NOT BUY REAL ESTATE FOR APPRECIATION ONLY! Of course every stop I make I always hear that I am not thinking right or that I am not taking advantage of the biggest benefit of owning real estate. I offer the following aspect to counter my fellow real estate “Investors”.

First – Investing in Real Estate is different than trading real estate. When you trade something you buy it low, you may put a little money in it to improve it, and then you sell it for a profit. This could be the same as investing in a stock that is trading low on bad news and then selling the stock trading better on good news. There is nothing wrong with trading real estate. As long as you classify the real estate trade as a trade and not investing.

Second – Investing in Real Estate is all about the cash flow. There are a thousand “guru’s” that have a thousand different ways to analyze a property as an investment. I like to take a much simpler approach. After I pay all the bills on the property (including vacancy and reserves for repairs), does the property put money in my pocket? If so I want to evaluate further and do my due diligence. If not then I move on. See simple formula

• Put money in my pocket? Evaluate further
• Take money out of my pocket? Ill pass

As I write this post we are starting 2015. This means we are exiting one of the worst real estate crashes in my generation. One (not the only, but one major) reason we had that crash was because people were willing to lose money every month to bet an appreciation. This worked in early 2000’s but eventually caught up to us and we had a foreclosure crisis. If you are looking for a short term trade and the increased value is there great. If you are looking as an investment then start by ensuring you will make money every month.