Smart investors know the right strategy plays an important role in building a real estate portfolio.
And that couldn't be more true for Ryan Boykin and Jason Shepherd, the cofounders of Atlas Real Estate, a Denver-based property management firm born out of the 2008 financial crisis.
"We saw a giant problem in society," they told Business Insider in an email, emphasizing the lack of financial opportunity for the "common Joe" to save for huge life events like sending kids to college or retirement. "However, investing in rental real estate can achieve this. It is the slow and steady approach to accumulating financial security over decades. It is proven and on the lower end of the risk spectrum."
Having built a firmwide portfolio of over 6,000 properties since founding Atlas in 2013, the cofounders have become experts in real estate investing, and live by strategic principles that guide their investment strategy.
They shared that strategic advice with Business Insider.
1. Cash flow is key
Liquidity is a focal point for any business, but matters just as much in property investment, where the Atlas cofounders say cash flow is critical. After all, the return you make on a property can make or break that investment.
In other words, the profits a property generates must outweigh its expenses. Factors like annual taxes, maintenance, and insurance costs must be lower than the rent a property owner can charge.
"Do deals that have cash flow," the pair said. "Cash flow is what will keep you in the game during downturns."
2. Make long-term bets, focused on the 20-year market
Looking for investments with long-term potential is key, according to the cofounders. "Trying to do a short-term speculative investment right now is not a strong approach," they said. "Too much uncertainty."
They said it's best to focus on markets that you believe are going to be strong over the very long term.
"Think 20 years," they said. "How certain are you that the economy in that market is strong enough to promise house appreciation 20 years from now?"
They said some markets are shaky when you consider economic factors such as net migration, wage growth, job growth, unemployment, and industry diversity, among other things.
3. Look for locations with natural limits
Boykin and Shepherd said they like locations that have great economic demand and are limited as to how much new supply of housing they can bring online.
"Denver is a great example of this," they said. "Mountains cover the west side of our city, so we cannot continue to build circles and circles of housing around the MSA (metropolitan statistical area). It becomes an inherent supply constraint, which enables greater future appreciation."
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