These are the 5 Golden tips that you should keep in mind any time you're investing in real estate..
The first one is that YOU MAKE MONEY WHEN YOU BUY and this is absolutely crucial when it comes to investing in real estate you either need to be buying into
equity or buying into cash flow or maybe just a combination of the two. Don't do what everyone else does which is buy something at market value for market rents without allowing
yourself any room for improving these things and therefore also improving your investment this doesn't always mean that you'll just need to buy something under market value you could be also buying into something with just immediate great cash flow instead or you could buy into something where you can strategically remodel it to improve rents and therefore improve your investment at the same time but ideally there should be some type of upside when you go and buy the property and either buying into immediate buying into immediate cash flow or being able to do renovations to improve those and therefore boost up your investment.
The second rule to live by is to NEVER FALL IN LOVE WITH YOUR INVESTMENT and this is something I see way too many people doing they initially go out and
start looking for the perfect investment but then fall in love with a home because it's super charming it's got a lot of character maybe it reminded them of the home that they grew up in despite it being just an absolutely money-sucking terrible investment but hey maybe the property just has a really good vibe to it right or maybe it's just a really cute neighborhood point being ,but this is an investment it's a business it is not a romantic comedy you just can't ever get emotionally attached to a property that you're going to be investing in for the purposes of being an investment now this is a tough one for some people to do if they're naturally just sentimental and emotional about their decisions now it's one thing to trust your intuition and to trust your gut about something but it's another thing entirely to ignore all the red flags all the really bad statements all of just the money sucking negativeness of a property because you feel good about the property and because you're attached to it ideally you have to be completely detached and unemotional about what you're buying some of the best investors that I've ever met and seen don't give a shit about the property they don't care at all they will look at it on a piece of paper and determine exactly what it's worth to them and what they're willing to pay and if it doesn't work out they don't care they feel nothing at all they turn the piece of paper maybe they crumple it up and then burn it and then they move on to the next deal with absolutely zero emotion because at the end of the day what really matters the most when you're doing this, the whole point of doing this is for money it's all for money you're making an investment for money you should not get attached to your investment because that will cloud your judgment when it comes to making money.
The third rule to live by is to have a BIGGER PICTURE WITH A LASER-LIKE FOCUS when it comes to investing in real estate it's a very localized economy and every single city is going to be
different don't get too caught up with headlines and national trends because at the end of the day real estate is really such a micro economy every single property in every single city is like its own little investment opportunity think of real estate almost like stocks every single stock is going to be different you can add the same stocks in the same sector and one is going up and the other one is crashing to the ground think of real estate investing a little bit like that and it's the specifics of
every single property in every single investment that really makes the most difference even though the markets can't rely economics in terms of going up overall and down overall.
The fourth rule when it comes to investing in real estate is to have a LONG-TERM OUTLOOK and also get a fixed-rate loan this is something that some people might disagree with me on and maybe they have a different approach maybe they want a shorter term fixed-rate loan and a lower interest rate and they're okay taking a riskier approach that is not what I personally like to do but my philosophy is quite simple it's just buy once and hold even though you might be able to get a much lower interest rate by getting maybe a five to 10-year adjustable rate mortgage which just means that your rate is locked in for that term you may as well if you plan to hold the property long-term lock-in the longest term you can now at a fixed interest rate especially while rates are overall still pretty low otherwise what's going to end up happening is that five to ten years from now your rate is going to readjust and I'm almost positive that five to ten years from now rates will be much higher than they are now if you lock in a 30-year loan now at a fixed rate you will at least know what your holding costs are for the entire ownership of that property if you lock it in for let's say seven years you can really only guarantee that your payment will be the same for seven years if rates shoot up dramatically after seven years you're gonna have to re-evaluate if that property is even worth it to keep and you're gonna be subject to whatever the local market is at that time and maybe it's not the best time to sell maybe something happened in the short term you have no idea but if your plan is to hold it you're gonna have to reevaluate at that time if it even makes sense to continue holding it because it totally depends on what the interest rate is getting a long-term fixed-rate loan really just mitigates your risk of maybe the markets going down interest rates going up and possibly forcing you to sell when you wouldn't ordinarily sell just because the interest rate is too high for it to ever make sense either way I really wouldn't recommend taking a short-term adjustable rate loan unless you're 100% sure that you're gonna be selling after that time if you know 100% you're only gonna keep the property for like seven years then sure don't get the 30-year loan get the seven to 10-year loan but if you know and you intend to keep the property for a long time but you just want the lower interest rate up front it's very short-sighted to think that way and there's a huge risk that interest rates spiked up and that severely impacts your cash flow once that happens and for the way I see it real estate is one of these markets where time in the market will outperform.
My fifth and final rule is to make sure it CASH FLOWS now I am one of these investors that personally likes finding homes in underappreciated areas where I can go in by under market value add a significant amount of equity in an area that's greatly appreciating but this is pretty risky and in mitigate this risk with my first piece of advice which is make money when you buy it which is why I always buy into instant equity and many scenarios your market is not going to be like Los Angeles which just has terrible cash flow but insane appreciation so in many situations appreciation shouldn't be something that you'd count on but would more so just be a great bonus if it happens instead you
should focus more on cash flow how much money you are investing and how much you're getting back every single month in return do not barely operate on a thin margin of cash flow unless you're making a ton of equity where you have the cash reserve to pay for anything that could come up while you own that property the biggest problem I see with a lot of people is that maybe they're barely cash flowing on the property maybe just like a few hundred dollars a month and then something drastic comes up maybe the HVAC goes out and it's five grand to repair that there goes a few years worth of cash flow if you're only making a few hundred dollars a month even if they've ended up making a ton of equity at the same time where maybe it doesn't really matter just making sure you have those cash reserves is so important and this is much harder to do if your property is not actively cash flowing so this is why I recommend focusing on cash flow first and then taking everything else into account later .
The first one is that YOU MAKE MONEY WHEN YOU BUY and this is absolutely crucial when it comes to investing in real estate you either need to be buying into
equity or buying into cash flow or maybe just a combination of the two. Don't do what everyone else does which is buy something at market value for market rents without allowing
yourself any room for improving these things and therefore also improving your investment this doesn't always mean that you'll just need to buy something under market value you could be also buying into something with just immediate great cash flow instead or you could buy into something where you can strategically remodel it to improve rents and therefore improve your investment at the same time but ideally there should be some type of upside when you go and buy the property and either buying into immediate buying into immediate cash flow or being able to do renovations to improve those and therefore boost up your investment.
The second rule to live by is to NEVER FALL IN LOVE WITH YOUR INVESTMENT and this is something I see way too many people doing they initially go out and
start looking for the perfect investment but then fall in love with a home because it's super charming it's got a lot of character maybe it reminded them of the home that they grew up in despite it being just an absolutely money-sucking terrible investment but hey maybe the property just has a really good vibe to it right or maybe it's just a really cute neighborhood point being ,but this is an investment it's a business it is not a romantic comedy you just can't ever get emotionally attached to a property that you're going to be investing in for the purposes of being an investment now this is a tough one for some people to do if they're naturally just sentimental and emotional about their decisions now it's one thing to trust your intuition and to trust your gut about something but it's another thing entirely to ignore all the red flags all the really bad statements all of just the money sucking negativeness of a property because you feel good about the property and because you're attached to it ideally you have to be completely detached and unemotional about what you're buying some of the best investors that I've ever met and seen don't give a shit about the property they don't care at all they will look at it on a piece of paper and determine exactly what it's worth to them and what they're willing to pay and if it doesn't work out they don't care they feel nothing at all they turn the piece of paper maybe they crumple it up and then burn it and then they move on to the next deal with absolutely zero emotion because at the end of the day what really matters the most when you're doing this, the whole point of doing this is for money it's all for money you're making an investment for money you should not get attached to your investment because that will cloud your judgment when it comes to making money.
The third rule to live by is to have a BIGGER PICTURE WITH A LASER-LIKE FOCUS when it comes to investing in real estate it's a very localized economy and every single city is going to be
different don't get too caught up with headlines and national trends because at the end of the day real estate is really such a micro economy every single property in every single city is like its own little investment opportunity think of real estate almost like stocks every single stock is going to be different you can add the same stocks in the same sector and one is going up and the other one is crashing to the ground think of real estate investing a little bit like that and it's the specifics of
every single property in every single investment that really makes the most difference even though the markets can't rely economics in terms of going up overall and down overall.
The fourth rule when it comes to investing in real estate is to have a LONG-TERM OUTLOOK and also get a fixed-rate loan this is something that some people might disagree with me on and maybe they have a different approach maybe they want a shorter term fixed-rate loan and a lower interest rate and they're okay taking a riskier approach that is not what I personally like to do but my philosophy is quite simple it's just buy once and hold even though you might be able to get a much lower interest rate by getting maybe a five to 10-year adjustable rate mortgage which just means that your rate is locked in for that term you may as well if you plan to hold the property long-term lock-in the longest term you can now at a fixed interest rate especially while rates are overall still pretty low otherwise what's going to end up happening is that five to ten years from now your rate is going to readjust and I'm almost positive that five to ten years from now rates will be much higher than they are now if you lock in a 30-year loan now at a fixed rate you will at least know what your holding costs are for the entire ownership of that property if you lock it in for let's say seven years you can really only guarantee that your payment will be the same for seven years if rates shoot up dramatically after seven years you're gonna have to re-evaluate if that property is even worth it to keep and you're gonna be subject to whatever the local market is at that time and maybe it's not the best time to sell maybe something happened in the short term you have no idea but if your plan is to hold it you're gonna have to reevaluate at that time if it even makes sense to continue holding it because it totally depends on what the interest rate is getting a long-term fixed-rate loan really just mitigates your risk of maybe the markets going down interest rates going up and possibly forcing you to sell when you wouldn't ordinarily sell just because the interest rate is too high for it to ever make sense either way I really wouldn't recommend taking a short-term adjustable rate loan unless you're 100% sure that you're gonna be selling after that time if you know 100% you're only gonna keep the property for like seven years then sure don't get the 30-year loan get the seven to 10-year loan but if you know and you intend to keep the property for a long time but you just want the lower interest rate up front it's very short-sighted to think that way and there's a huge risk that interest rates spiked up and that severely impacts your cash flow once that happens and for the way I see it real estate is one of these markets where time in the market will outperform.
My fifth and final rule is to make sure it CASH FLOWS now I am one of these investors that personally likes finding homes in underappreciated areas where I can go in by under market value add a significant amount of equity in an area that's greatly appreciating but this is pretty risky and in mitigate this risk with my first piece of advice which is make money when you buy it which is why I always buy into instant equity and many scenarios your market is not going to be like Los Angeles which just has terrible cash flow but insane appreciation so in many situations appreciation shouldn't be something that you'd count on but would more so just be a great bonus if it happens instead you
should focus more on cash flow how much money you are investing and how much you're getting back every single month in return do not barely operate on a thin margin of cash flow unless you're making a ton of equity where you have the cash reserve to pay for anything that could come up while you own that property the biggest problem I see with a lot of people is that maybe they're barely cash flowing on the property maybe just like a few hundred dollars a month and then something drastic comes up maybe the HVAC goes out and it's five grand to repair that there goes a few years worth of cash flow if you're only making a few hundred dollars a month even if they've ended up making a ton of equity at the same time where maybe it doesn't really matter just making sure you have those cash reserves is so important and this is much harder to do if your property is not actively cash flowing so this is why I recommend focusing on cash flow first and then taking everything else into account later .
