Investors who want to make quick profits, use this approach. Positive cash flow occurs whenever the mortgage payment and all expenses on a property are less than the rents. Investors who would rather invest in real estate for the long term use this approach. They may want the tax benefits of real estate ownership. They also prefer to earn a monthly income from their properties and to let the property appreciate naturally over time.
Equity can occur in either of two ways.
First, at the time of purchase, whenever the purchase price is lower than the true market value of the house, there is existing equity in the property. Second, when the value of a property can be greatly increased by relatively minor or inexpensive fix-up or repair, you are creating equity. Every real estate deal should stand on its own. In the event one deal fails, your other profitable transactions should not be connected to it in any way. Never allow one bad deal to have a domino effect and pull down all your good deals with it.