I came up with the following rules of successful real estate investing over my numerous years of successes and failures. These are the same rules I follow today and share with our customers at Norada Real Estate Investments.
1. Educate Yourself
Knowledge is the new currency. Without it you are doomed to follow other people?s advice without knowing if it?s good or bad. Knowledge will also help take you from being a ?good? Financier to changing into a great investor, and that knowledge will help give a passive stream of revenue for you or your family.
2. Set Investment Goals
A goal isn't the same as a wish; you may need to be rich, but that doesn?t mean you?ve ever taken steps to make your wish come true.
Setting clear and specific investment goals becomes your road map and action plan to becoming independent in a money sense. You are statistically far likelier to achieve financial independence by writing down precise and detailed goals than not doing anything.
Your goals can include the amount of properties you need to acquire annually, the yearly cash-flow they generate, the sort of property, and the location of each. You may additionally want to set parameters on the rates of return required.
3. Never Speculate
Always invest with a long-term viewpoint in mind. Never speculate on fast short term gains in appreciation, even in a heated market experiencing double-digit gains. You never can tell when a market will top and it?s customarily 6 to 9 months later when you find. Don?t chase after appreciation. Only invest in prudent value plays where the numbers appear sensible from the start.
4. Invest for Cash flow
With few rare exceptions, always buy investment property with a positive cash-flow. The higher, the better. Your cash-on-cash return is related to the before-tax cash-flow from your property.
Cash flow is the ?glue? That keeps your investment together. Your equity will grow over time (through appreciation and loan amortization), while the cash-flow covers the operating expenses and debt service on your property.
5. Be Market Agnostic
The U. S. is a really enormous country made from loads of local real-estate markets. Each market goes up and down independently of each other due to several local factors. As such, you must recognise that there are occasions when it is smart to take a position in a selected market, and times when it does not. Only invest in markets when it is sensible to do that not because you live there or you purchased property there before. There?s a factor of timing and you don?t want to go against the trend.
6. Take a Top-Down Approach
Always begin by choosing the best markets that align with your investment goals. Most investors start by analyzing properties with little to no regard of its location. This can be a major mistake if you don?t consider the investment given the market and neighborhood it?s in.
The best approach is to first select your town or city based primarily on the health of its housing market and local economy (unemployment, job growth, population expansion, for example.). From there you would narrow things down to the best districts (comforts, schools, crime, renter demand, for example.). Finally, you would look for the neatest deals within those areas.
7. Diversify Across Markets
Focus upon one market at a time, amassing from 3 to 5 income properties per market. Once you?ve added those 3 to 5 properties to your portfolio, you would diversify into another prudent market that is geographically different than the prior one. Sometimes that suggests focusing on another state.
One of the underlying reasons for diversification in the same asset class (real-estate), is to have your assets spread all over different business centres. Every real estate market is ?local? And each housing market moves independently from one another. Expanding across multiple states helps reduce your ?risk? Should one market decline for any reason (increased unemployment, increased taxes, etc.).
8. Use Professional Property Management
Never manage your own properties unless you run your own managing company. Property management is a rude job that needs a solid appreciation of tenant-landlord laws, good selling skills, and strong people skills to handle tenant grumbles and excuses. Your time is valuable and should be spent on your family, your career, and attempting to find more property.
9. Maintain Control
Be a direct investor in real-estate. Never own real estate through funds, partnerships, or other paper-based investments where you own shares or other securities of an entity you don?t control. You mostly want to be in control of your real estate investments. Don?t leave it up to companies. Or fund chiefs.
10. Leverage Your Investing Funds
Property is the only investment where you can borrow other people?s money (OPM) to purchase and control income-producing property. This permits you to leverage your investing funds into more property than purchasing using ?all cash? Leverage magnifies your general rate-of-return and accelerates your wealth creation.
So long as you have positive cashflow and your renters are clearing your home loan for you, it would be dumb not to borrow as much as practical to buy more income property.
1. Educate Yourself
Knowledge is the new currency. Without it you are doomed to follow other people?s advice without knowing if it?s good or bad. Knowledge will also help take you from being a ?good? Financier to changing into a great investor, and that knowledge will help give a passive stream of revenue for you or your family.
2. Set Investment Goals
A goal isn't the same as a wish; you may need to be rich, but that doesn?t mean you?ve ever taken steps to make your wish come true.
Setting clear and specific investment goals becomes your road map and action plan to becoming independent in a money sense. You are statistically far likelier to achieve financial independence by writing down precise and detailed goals than not doing anything.
Your goals can include the amount of properties you need to acquire annually, the yearly cash-flow they generate, the sort of property, and the location of each. You may additionally want to set parameters on the rates of return required.
3. Never Speculate
Always invest with a long-term viewpoint in mind. Never speculate on fast short term gains in appreciation, even in a heated market experiencing double-digit gains. You never can tell when a market will top and it?s customarily 6 to 9 months later when you find. Don?t chase after appreciation. Only invest in prudent value plays where the numbers appear sensible from the start.
4. Invest for Cash flow
With few rare exceptions, always buy investment property with a positive cash-flow. The higher, the better. Your cash-on-cash return is related to the before-tax cash-flow from your property.
Cash flow is the ?glue? That keeps your investment together. Your equity will grow over time (through appreciation and loan amortization), while the cash-flow covers the operating expenses and debt service on your property.
5. Be Market Agnostic
The U. S. is a really enormous country made from loads of local real-estate markets. Each market goes up and down independently of each other due to several local factors. As such, you must recognise that there are occasions when it is smart to take a position in a selected market, and times when it does not. Only invest in markets when it is sensible to do that not because you live there or you purchased property there before. There?s a factor of timing and you don?t want to go against the trend.
6. Take a Top-Down Approach
Always begin by choosing the best markets that align with your investment goals. Most investors start by analyzing properties with little to no regard of its location. This can be a major mistake if you don?t consider the investment given the market and neighborhood it?s in.
The best approach is to first select your town or city based primarily on the health of its housing market and local economy (unemployment, job growth, population expansion, for example.). From there you would narrow things down to the best districts (comforts, schools, crime, renter demand, for example.). Finally, you would look for the neatest deals within those areas.
7. Diversify Across Markets
Focus upon one market at a time, amassing from 3 to 5 income properties per market. Once you?ve added those 3 to 5 properties to your portfolio, you would diversify into another prudent market that is geographically different than the prior one. Sometimes that suggests focusing on another state.
One of the underlying reasons for diversification in the same asset class (real-estate), is to have your assets spread all over different business centres. Every real estate market is ?local? And each housing market moves independently from one another. Expanding across multiple states helps reduce your ?risk? Should one market decline for any reason (increased unemployment, increased taxes, etc.).
8. Use Professional Property Management
Never manage your own properties unless you run your own managing company. Property management is a rude job that needs a solid appreciation of tenant-landlord laws, good selling skills, and strong people skills to handle tenant grumbles and excuses. Your time is valuable and should be spent on your family, your career, and attempting to find more property.
9. Maintain Control
Be a direct investor in real-estate. Never own real estate through funds, partnerships, or other paper-based investments where you own shares or other securities of an entity you don?t control. You mostly want to be in control of your real estate investments. Don?t leave it up to companies. Or fund chiefs.
10. Leverage Your Investing Funds
Property is the only investment where you can borrow other people?s money (OPM) to purchase and control income-producing property. This permits you to leverage your investing funds into more property than purchasing using ?all cash? Leverage magnifies your general rate-of-return and accelerates your wealth creation.
So long as you have positive cashflow and your renters are clearing your home loan for you, it would be dumb not to borrow as much as practical to buy more income property.
About the Author:
Marco Santarelli is an investor, author and founder of Norada Real Estate Investments -- a nationwide real estate investment firm providing turnkey investment property in growth markets around the U. S.. "10 Rules of Successful Real Estate Investing" was originally published on the Real Estate Investing Blog.
0 التعليقات:
إرسال تعليق