Monday, February 22, 2010

Pyramids stand the test of time......

...only if they have a really strong foundation.

Guideline #21: Pyramiding, or using the equity in one property
to buy another property, is not to be undertaken lightly.

As with leverage (see Guideline #20), pyramiding can be your
friend, or your enemy.

With a strong foundation (well maintained properties with strong
tenants, ample cash flow with reserves on hand, and a respectable
amount of equity), a pyramid will build solid wealth.

With a weak foundation (poorly maintained properties with
transitional tenants, with little or no reserves), pyramiding
resembles a house of cards- soon to be tumbling down.

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