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.
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.
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!