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The more
knowledge of real estate investing techniques, financing,
acquisition, negotiating and, of course, your local marketplace,
the less risky your investments will be. A bargain real estate
purchase will generally always be a safe investment; a bargain
stock purchase isn't - after all, who says the company you
bought into will be in business next year?.
In order
to stay in real estate long term, you need cash reserves.
Buying real estate nothing down is easy; handling negative
cash flow, repairs and other expenses in the meantime is the
trick. In fact, if you can handle the bad times, real estate
will always make you come out on top. Lack of cash reserves
puts unnecessary pressure on you to do substandard repairs,
accept less than qualified tenants and give into tenants'
demands for fear of vacancy.
When you
have a sufficient cash reserve, you act rationally. You hold
out for a higher sales price. You hold out for a qualified
tenant. You leave properties vacant rather than rent to low-lifes.
You call a tenant's bluff when they threaten to leave. You
take care of necessary repairs and improvements on your properties.
It's a whole different ballgame than operating from a lack
of cash. Like I said, buying properties with no money down
isn't hard; it's handling the cash flow. In other words, you
can buy real estate without money, you just can't survive
in business without cash reserves. Thus, consider accumulating
cash reserves before investing in rental properties.
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