Whether you are just getting started on your real estate investing journey or you have been already made your first deal, there is always something new to learn. Just like there are tips, tricks, and techniques, there are new ways of doing things that are worth learning. These 6 basic principles of real estate investing will help you be prepared in every real estate situation as well as reach your goals.
Real Estate Investing Principles
Real estate investing is all about relationships. People are your most valuable resource, and the more you know, the more likely you are to find good properties to purchase or buyers for your properties. Ask for people’s names, and take notes so you can remember what you discussed for future reference.
Network with the right people, including a real estate agent who gets many listings of the type you are interested in. If you don’t know a real estate agent, get out and meet new people at your local meet up groups so you can start building positive relationships. Wouldn’t it be nice if you were the one first person they called about a new listing?
When you look at a rental property, you need to know and understand the relevant numbers. For example, you should be thinking about how much income this property costs, the expenses associated with getting it ready for tenants or a new homeowner, the capitalization rate, or “cap rate.”
When you look at a rental property, you should be thinking about the income, expenses, and capitalization rate, or “cap rate.” Imagine how certain changes would allow you to raise the income, and what that would do to the value of the property. Having a “feeling” about a property, without understanding the numbers, gets so many investors into trouble.
Reduce the risk
Look for and use methods to reduce risk when it comes to real estate investing. You can’t just go into a deal without assessing the risk before signing anything. Making sure you have contingencies in place like having an inspection, financing, and other clauses worked into the offer to help reduce the risk of a deal. These things will also help you get your deposit back if a deal falls through or the like.
While reducing the risk of your deal, consider having an exit strategy before you buy with a “plan B” in place as well. Knowing there is an “out” if needed, gives you peace of mind while you are investing in real estate. Know the value of your real estate investment by using comparables or cap rates, not “hunches.” Going on a “hunch” about a property can get investors in trouble quickly.
Just like any business, you must be prepared in every situation. Have business cards, a pen, and paper on you at all times. You never know when you will see a property for sale, or hear about one that just hit the market. When you mention that you invest in real estate, buyers, sellers, and other investors suddenly appear with information, opinions, and sometimes even great deals. So always be prepared to tour a property and potentially make a deal.
Set clear goals
Create clear, action-oriented goals, not just wishes. For example, you could require yourself to look at a certain number of properties per week. Or maybe your goal is to write a certain number of offers each month. Or it could be preparing at least one property every 2 months to get on the market as a rental. Set clear goals for every single step of the process, like making six phone calls per week, checking online listings twice per week, and so on.
Action creates momentum and repeated action creates habits. Good habits that lead to more successful real estate investing success for you.
Learn and apply it
Real estate investing is not about just setting and forgetting about it. You have to keep getting educated, and using that education towards your success. Learning more from magazine, books or even a real estate podcast is a great idea, as long as you spend as much time applying what you learn as reading about it. Some of us let the interest and enjoyment of reading about investing get in the way of actually investing. Good information is crucial, but it should lead to good real estate investing success.
Use these 6 basic principles in your day to day real estate journey. Believe me, they will help you be prepared in every real estate situation you are in to reach your goals in real estate.