their own investment portfolio. This type of passive investor tends to be in- clined toward longer-term investments and, generally speaking, cash-flow- ing turnkey rentals. Once a rental is performing, they may opt to essentially forget about that investment entirely, simply collecting their rental income or allowing their retirement account to do so and grow accordingly. Bowers believes while this strategy certainly will build a certain level of stability in any portfolio, investors who fail to consider more flexible options with their turnkey investments stand to miss out on huge opportunities. “So far this year in the DFW area, we’ve shown about one-percent appreciation each month, which we expect to level out at 12 percent appreciation for the entire year of 2017,” he said. “For our investors who purchased in the area in, say, 2013, they have been able to take the benefits of cash-flowing rentals in this market and still stand to benefit from that fast growth in the area. However, with growth like that, it may be getting close to time to sell those properties at peak value and move into another market that is set to appreciate at an accelerated rate – collecting monthly cash flow in the interim, of course.” Prime Properties recommends investors at least be willing to consider forcing appreciation in the short term by updating rentals to the point that they will be attractive to owner-occu- pant buyers should the investor decide to sell, then renting those properties at a premium (which may also force ap- preciation) while the company carefully monitors market trends. “When prices start to jump and renters start looking elsewhere in an area, you can sell your
DON’T LET YOUR RENTAL PROPERTY INTERRUPT YOUR HOLIDAYS
Long-term investors should monitor market trends in case shifts necessitate a strategic adjustment .
ciation, which takes place over a long period of time (30 years, for example) and can cause the value of a property to increase two percent, four percent, and even six percent in some areas.” He add- ed “instant appreciation” happens when you purchase a property at a discount and it is automatically (and instantly) worth more than you paid for it, and “forced appreciation” involves making wise investments into the property that cause it to rise in value and may extend to tax benefits as well. IT’SALLABOUTFLEXIBILITY When real estate investors think of long-term turnkey investments, they tend to think of real estate investments that are handled by another party. This type of investment is highly attrac- tive to many investors who appreciate the earning and wealth-accumulation potential in real estate but do not have the time or specialized knowledge (nor, necessarily, the inclination to acquire that knowledge) to acquire and manage
10 years than 15 or more. “When you’re in real estate, you are essen- tially in wealth building,” explained Ryan Bowers, president of Dallas-Fort Worth-based Prime Properties Realty, a turnkey investment provider serving mainly passive investors. He continued, “That means that although cash flow is really important, it is not necessarily always king. Long- term investment properties should be in good areas that will perform when the market goes down and the economy is tough, but when things are going up, you have to focus on how you are going to best leverage the market.” Tom Olsen, senior vice president at Good Success and advocate for active turnkey investing, noted investors cannot disregard appreciation when en- acting a long-term investment strategy. “There are three types of appreciation in real estate: long-term appreciation, instant appreciation, and forced appre- ciation,” he said. “Generally, people are most familiar with long-term appre-
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Carole VanSickle Ellis is the editor of Think Realty Magazine. She can be reached at cellis@thinkrealty.com.
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