One of the most powerful tools you can have in your personal investment toolbox is your personal set of investment criteria. Once you have decided on the type of growth assets you will be using in your personal investment strategy, then the next step is to determine the investment criteria you will use to carry out that strategy.
Investment criteria are simple both in description and application. These are the rules you live by while you invest. Think about a simple real estate investment. You want to buy a single family home. You look at house after house after house. What is it that is going to make you want to buy it?
Of course, your decision will be quite different if you are buying it for your personal residence. In that case, you will look at the design and the neighborhood and the floor plan. You may even look at the school district if you have kids and how close it is to your work.
When you buy an investment property, the criteria will be quite different. You are interested in cash flow and appreciation. That’s it. So, you look at how it will rent compared to it’s purchase price. And you will look at the expected appreciation in the neighborhood.
Just like everyone has different criteria for purchasing their personal residence, so different investors will have different investment criteria. Some investors want more cash flow, some want more appreciation and others want more leverage. How to choose your investment criteria is the focus of one of our courses in our School of Wealth Strategy entitled, “Your Wealth Strategy.” In this course, we teach our students how to develop their own personal set of criteria.