Never Compromise on These 2 Things When Buying an Investment Property

New investors are always asking me for my top real estate investment tips. In truth, investors should absorb any advice they can get their hands on—but there are two essentials you must know.

Let’s get started.

Just thinking about buying a home for the first time brings waves of emotion. It’s both an exciting and frightening concept for most people. First and foremost, know you’re not alone! Over one-third of all Americans are considering buying a home in the next five years. Our First Time Home Buyer’s Guide prepares you for the road ahead.

Must-Have #1: A Solid Real Estate Investing Team

When you’re looking to buy an investment property or build a large portfolio, start with your team. And never compromise.

I can’t explain how vital building a solid team is to your survival, success, growth, and everything. You must surround yourself with the right people.

Now, if you’re looking at buying turnkey, there’s a lot of shady operators out there. So make sure that you conduct your due diligence and find a good, trustworthy operator.

If you’re looking at doing it yourself you need to look at real estate management, a property management company, a construction company, maintenance people, a trustworthy real estate attorney, an accountant that understands real estate, a title company, a building inspector, and an appraiser and lender.

Another one is a mentor—someone excelling in the game every day—who you can rely on for advice.

These people are your eyes and ears and the heart and soul of your real estate endeavors. So it’s very important that you never compromise on these people and that you don’t start until you have a competent bunch of people around you. This can take six, nine, 12 months to establish.

Guys, there is no rush. Real estate is not a one-night stand. It’s a marriage, a long-term play, and a commitment. Sometimes it can take five, 10, or 15-plus years to get you where you need to be—from a real estate portfolio standpoint, from a passive income standpoint, and from a growth standpoint.

So why are you rushing in?

Take your time, and remember that all good things take time. Network equals net worth, so build the team before you start your real estate endeavors.

Must-Have #2: Knowing the Numbers

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The second thing you should never compromise on is the numbers in the deal. Before you start your real estate investment journey, you have to know what kind of passive income you want to generate every single month to achieve financial freedom and to be able to live the lifestyle that you want to live.

Once you’ve established that passive income amount, let’s just say it’s $10,000 per month, then you know that every single property that you buy needs to get you a step closer to achieving your end goal.

Then you start looking for markets, areas, regions where you can buy a good property in a good area with good structure. And maybe a bit of room for capital appreciation even though it’s not that important. Plus, since you have good people there, you can predict the longevity of your investment from a return-on-investment standpoint.

So it’s really important that you are only accumulating and buying properties that get you one step closer to your goals.

We’ve established our goal of $10,000 per month, or $120,000 per year, so why are you buying properties where the return on investment breaks even—or worse, you’re losing money every month? Why?

If your expenses are more than the income, that’s insanity. That is not investing to suit your end goal.

Don’t compromise and buy such properties because someone says they can wave their magic wand and the property is going to appreciate in value. They say your’re going to be a millionaire.

Guys, all good things take time, and nothing happens overnight. There is no get-rich-quick here. You’re going to have to pound the pavement for many years to achieve financial freedom.

That’s why it’s very important that you never compromise on the numbers. Ensure you’re not including any capital appreciation in your projections, because it’s speculative. Look at the core fundamentals of every single transaction, including purchase price, expenses, and income.

Underestimate your income, and overestimate your expenses. Always give yourself a margin of safety.

How much does that property produce in passive income every single year?

It produces $10,000 per year. Great.

Does that $10,000 get me one step closer to achieving my end goal?

Yes, because I want to have $120,000 a year in passive income, and this property gets me one step closer to that.

It’s very simple.

Back to the first thing: Find the best team, because teamwork makes the dream work. The second thing is to never compromise on the numbers and make sure the net return on investment gets you one step closer to your end goal. That’s it!

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.