5 $200k Properties Or 1 Million Property
My 2 friends and I have started a business to buy real estate. We have been looking to buy units that sell for approx $200k. Over the next 10 years our plans were to buy more and more $200k properties. But as we start looking, we have been thinking, maybe we should just buy a building for a million dollars today, leverage that in say 4 years and buy a 2-3 million dollar property. We could be better off in 5 years buying million dollar properties today, than $200k properties...correct?
Absolutely........you're on the right track. Consider diversifying though. If you put all of your "risk" into one property, make sure you do you market research....e.g. demographic profile, stability, supplyu and demand, economic development. This is vital because, more often than not, million dollar property is commercial. And the success of any investment commercial property hinges on the local business environment. If it's residential, then your returns are probably more stable. Study your market. In a few years, you could refinance or sell and pyramid into a 2-3 million $ property. Hope this helps.
The answer is, it depends. How much return will you make from each investment. You can exchange for a $2-3 million property if you started with either scenario. There may be less transaction costs & may be easier to manage one large property rather than several scattered in different areas.
Boy and I thought I had a problem......buy an 80k SFH or a 70k SFH....