5 Truths First-Time Real Estate Investors Can Learn From Seasoned Pros

by | BiggerPockets.com

You may dream of investing in rental properties and building a real estate portfolio that allows you to enjoy steady (and somewhat passive) income in the future. But if you’ve never invested in real estate before, then there are some things you definitely need to know before getting started.

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5 Principles to Invest By

Real estate investing—much like life—continually throws new things at you on a revolving basis. Just when you think you’ve got something figured out, it becomes apparent that there’s more to learn. So how do you invest with confidence, without risking the shirt off your back?

It all comes down to knowing what you’re going to do before you find yourself in a given situation. When you find yourself in a situation, you already need to know how you’re going to respond. This prevents emotions and pressure from playing a part in the process.

With that being said, there are a few principles you can and should abide by if you want to be successful in real estate investing.


1. You make your money when you buy.

You’ve probably heard this concept mentioned before, but it’s hard to understand until you have some experience. You make your money when you buy, not when you sell or renovate. All you have to do is study historical real estate appreciation charts and take a look at recent reports. Real estate appreciates over time, and you’re going to make the money when you buy low. Never spend more than you think a property is worth.

Related: Why Turnkey Rentals Might Just Be an Ideal Investment for Real Estate Newbies

2. Only buy a property you’d live in.

This is a hard principle for many to abide by, but it’s especially important. You should never buy a property that you aren’t willing to live in. This simple principle is based on the fact that, should everything in your life fall apart, you may eventually have to live in it. The chances of this happening are extremely low, but it’ll keep you grounded when you picture investment properties through this lens.

3. Always hire the right partners.

Few things are more significant than the people you choose to work with. Align yourself with honest, experienced, hard-working people, and you’ll get better results. Align yourself with greasy swindlers, and you’ll end up on the losing end of a deal more often than not. The former may cost you more than the latter, but your reputation and bank account will thank you in the long run.

4. Regular inspections are crucial.

One of the biggest mistakes real estate investors make—especially when it comes to rental properties—is failing to perform ongoing checkups. It doesn’t matter if it’s a rental property in a low-income neighborhood or a warehouse you’re leasing to a Fortune 500 company—regular inspections are a must.


Related: 11 Common Pitfalls Real Estate Newbies Should Guard Against

5. Never long-distance landlord.

Long-distance landlording is a major mistake. Whether it happens by default—moving out of state—or you do it on purpose, trying to manage a property from another state will leave you vulnerable to a lot of unnecessary risks. Think about this before putting yourself in a compromising situation.

Don’t Lose Focus

It’s easy to get attached to a property or pressured into making a deal when one of your business partners thinks it’s a good idea. And if you don’t have any principles to abide by, then you’ll fall for these traps every time. The key is to develop a set of principles, such as the ones outlined in this article, and hold them close.

If an investment deal violates these rules, then politely back out. You’ll be better for it.

Do you agree with these principles? Anything you’d add to the list?

Leave your comments below!

About Author

Larry Alton

Larry is an independent, full-time writer and consultant. His writing covers a broad range of topics including business, investment and technology. His contributions include Entrepreneur Media, TechCrunch, and Inc.com. When he is not writing, Larry assists both entrepreneurs and mid-market businesses in optimizing strategies for growth, cost cutting, and operational optimization. As an avid real estate investor, Larry cut his teeth in the early 2000s buying land and small single family properties. He has since acquired and flipped over 30 parcels and small homes across the United States. While Larry’s real estate investing experience is a side passion, he will affirm his experience and know-how in real estate investing is derived more from his failures than his successes.


  1. Christopher Smith

    I personally stay away from platitudes because they are to me an incredibly poor substitute for diligent and thoughtful consideration. Like a good legal argument, each one should be built based on its own unique facts and generally accepted rules of thumb or “tried and true” default settings almost always produce inferior long term results.

    If any of the above 5 happen to be the right answer in a particular situation that will surely reveal itself after thoughtful consideration, if not then that too will reveal itself. I can think of many personal situations of my own where they have applied, and when they have not. Due diligence, the ability to improvise and the confidence/capacity to act should be the ultimate decision drivers/makers. Yes they are much harder to master than the auto pilot simplicity of rules of thumb, but for superior long term decision making there is no substitute.

  2. Lisa Phillips

    I have done 2 out of 5 successfully (I invest in neighborhoods I don’t live in AND out of state), and I teach the other investors how to do the same because those 5 principles wont necessarily make sense as an investor (i.e. you live in San Diego – and DONT invest out of state? So start off as a new investor with a 500k condo that barely cashflows?).

  3. Ralph R.

    Larry. I have to disagree with your blanket statement about long distance investing in real estate. At the very least you should point out that it can be done but you cannot follow the same rules and practices as you would when investing locally. There are drawbacks and there are benefits as well. To create a blanket statement never invest out of state effectively limits growth, reduces potential, and forces a potential investor to deal with whatever circumstances are present in his nearby market when a better set of conditions may exist else where. How big would Wal-Mart be if they operated in one state only?? You can bet the corporate office manages more stores out of state than they manage in state. It’s a different set of rules and requires a different management style but it also offers better oportunitys to grow and better diversification. Simply stating “never try to manage out of state” and not stating any particular reasons is limiting ones ability to grow and create stability unnecessarily. Remember the the guy who says “I can’t do that” will never go as far as the guy who asks the question “how can I do that?” RR

  4. Abram Howard

    This is great advice to someone new like myself. It sets some very clear and detailed guidelines to follow when first starting. Everyone has their own tactics but I will like to play it safe in the beginning. Not many people dumped all their money into a stock and made it big, most lost everything.

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