Ten Real Estate Investing Tips
Ten real estate investing tips for keeping it safe and profitable.
real estate investing tips, investing, real estate
Real estate investing tips tend to be a bit vague, like "invest in the
right location," or "make sure the numbers work." Actually, tips like
these are important principles to remember. However, since they have been
well represented in other articles, I want to share a few more specific
tips with you.
1. Listen to the market. The cabinet guy looked to me for a decision. I
realized that I knew nothing at all about which cabinets people like, so
I asked him which ones others were choosing, and he pointed to one that
three quarters of his last forty customers had chosen. That's the one I
want, I told him. Why argue with the market you are trying to sell to?
2. Do your own research. The real estate agent might show you only the
comparable sales that make the property look more valuable. Do your own
research. Some counties have made it easy now, with sales prices online.
You can also search any number of sites with MLS listings, just to get an
idea about the asking prices of other nearby properties.
3. Partner carefully. When you do a deal with partners, be the money or
the management, but not both. Group decisions tend not to work well in
real estate, and will cause you much stress. Once you decide on and agree
to a plan, step back if you are investing the capital, and let your
partner do his thing. Of course, step up and take control if you are
managing the project.
4. Negotiate openly. Just ask a seller outright, "What do you want to get
out of this?" It is rare that someone is offended by this simple
question, and it saves you from wasting valuable time talking about
things that don't interest him or her. Once you get a clear answer, you
can decide if you can give them what they want, and still get what you
5. Invest safely. Investing isn't gambling. There is always risk, but the
difference is that the odds are in your favor. If not, you are gambling.
This why you shouldn't invest based on continued price increases. There
is no guarantee that prices will continue up at any particular rate. Do
deals that work even if prices go nowhere, and if values go up, you're
that much better off.
6. Run the numbers. It is about the numbers, and if it is income
property, it's about one number in particular: cash flow. Whatever the
local formulas are, whether gross rent multipliers or capitalization
rates or whatever, just be sure that after every last expense you'll have
cash flow from the very first month.
Rules, formulas and real estate tips are really just guidelines. Even the
rule above about cash flow can be broken if you know that rents can be
raised soon, for example. You have to use common sense and learn from
experience, and you can't replace good analysis with rules, formulas and
real estate tips.