The Absolute Must-Have Fundamentals of Real Estate Investing

The Absolute Must-Have Fundamentals of Real Estate Investing

2 min read
Ali Boone

Ali Boone is a lifestyle entrepreneur, business consultant, and real estate investor, who has literally defined non-conformity when it comes to her career. Ali left her corporate 9-to-5 job as an Aerospace Engineer—despite the “dream job” status that came with it—to follow her passion for being her own boss and truly designing her lifestyle. She did this through real estate investing.

Experience
Using primarily creative financing to purchase five properties in her first 18 months of investing, Ali’s real estate portfolio started with pre-construction investments in Nicaragua and then moved toward turnkey rental properties in various markets throughout the U.S. With this success, she went on to create her company Hipster Investments, which focuses on turnkey rental properties and offers hands-on support for new investors and those going through the investing process.

Ali’s written roughly 190 articles for BiggerPockets and she’s been featured in FOX Business, The Motley Fool, and Personal Real Estate Investor magazine. She has over 300K views on her “Calculating Rental Property Numbers” video on YouTube, has sold over 200 copies of her Turnkey Rental Properties 101 eBook, and was awarded Top 100 Real Estate Investing Blogs & Websites. Her articles teach successful rental property fundamentals, investor psychology, and strategies to help get new investors started.

She still owns her first turnkey rental properties and she is also a co-owner and the landlord of a local property to her in Venice Beach.

In addition to running Hipster Investments and working as an active business consultant, she’s a pilot and teaches flying. She can often be found snowboarding, hiking, or volunteering in California prisons. Her ultimate goal is to one day challenge Tim Ferriss to a lifestyle design duel.

Education
Ali has two master’s degrees: a master’s in Aerospace Engineering from Georgia Tech and a master’s in Spiritual Psychology from the University of Santa Monica. Her undergraduate degree is a bachelor’s in Aerospace from Middle Tennessee State University.

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Instagram & Twitter: @HipsterInvest or @aliboonedotcom

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What are they? I certainly don’t know all of them because I don’t have experience with all of the different aspects of real estate investing, but that’s why we have BiggerPockets- let’s create the list together.

When I say fundamentals, I’m talking about the first thing you would say to a brand new investor who knows nothing about investing. What is the one thing that stands out above all else that a new person has to know? Without it, they are doomed to failure.

I’ll start.

Cash Flow

For rental properties, the number one must-have is positive cash flow.

Unless you are intentionally buying a property in hopes that it will appreciate and that’s where you plan to see the profits, there must be anticipated positive cash-flow every month.

What does this mean?

It means that the amount you collect in rent from your tenants has to be greater than the total amount of your expenses. This seems oddly simple, but you’d be surprised how many people who are interested in real estate investing, but haven’t yet entered into our world of fun, don’t realize what constitutes a profitable rental property.

I know before I was ever in real estate I had the misconception that just owning a rental property was a good move. I got suspicious about the profit side of it after I looked at a handful of properties in Orange County, CA and couldn’t quite put my finger on why but something about the numbers didn’t make sense to me. Pay $270,000 for a small torn-up property that would rent for $1200/month? I didn’t know what I should be calculating, but that struck me as off. Sure enough, now that I am in real estate, I know for sure those would have been horrible deals. The mortgage cost alone on that property wouldn’t have been covered by the rents.

You should never get duped into thinking that just owning a rental property is a good move. If it costs you money every month to own it, you aren’t getting the benefit that a rental property should be giving you. People skip over this basic lesson usually for one of two reasons:

  1. They have only been taught that owning a rental property alone is a smart move and no one dug into that concept further with them, or
  2. They live in an area, such as LA or NY, where prices are so high that rents would never cover the expenses and they have no idea that isn’t the case in other markets.

Being able to buy the same house in Atlanta for $120,000 that someone in LA would have to pay over $1,000,000 for barely seems realistic, but it is.

Related: How I Analyze a Real Estate Deal, Step by Step

Your Turn…

Okay, that’s my vote for a rental property fundamental and I’m starting the list with that. You can either expand on that concept or give us your own. Especially flippers, appreciation investors, wholesalers, note buyers, and any other type of investors- give some direct input about your field so anyone interested in that field can be aware of those fundamentals. As you start commenting, be sure to specify the type of investing you are referring to or if you are just speaking to real estate investing in general.

What is the first fundamental lesson you would teach your grandkid as soon as they say they want to become a real estate investor?