Here is a story of success and the names have been changed.
Bob, the story teller, had an investor client offer to sell him one of his condos for a small down payment and take over his payments. Bob didn’t even have enough money for a down payment, so he asked another investor client to hold a second mortgage. The existing first mortgage was held by a private investor who agreed to allow the assumption.
At closing Bob actually walked away with $250. He used the money to buy paint and staging items, then he rented the condo quickly. Bob had a small negative cash flow that was offset by the tax savings during the first 2 years. After that the second mortgage was paid off rents began to go up.
The story gets better. The original mortgage only had 12 years remaining when Bob bought the unit. He actually kept the property about 15 years, invested sweat, and earned a small positive cash flow for 10 years, a larger positive for 3 years. He sold it as the market was rising for about 50% more than he paid.
This is a great story and actually reveals a very good conservative investment strategy. Buy property to create a small positive or break even cash flow within 2 to 5 years. A negative has to be offset by tax relief. A good property has positive cash flow and appreciation, but these maybe hard to find. A property with an upside means it is worth more than you pay for it, the value can be increased by more than it costs to improve it, or it is in a location that may increase in value.
Buying property can be a great investment and can be risky. If it was easy everybody would do it. if you think you are ready, run the numbers, do your homework and get advice from a tax specialist, property manager, reputable lender, estate planner and a Realtor who is committed to putting your interests first.