1. Educate Yourself
Knowledge is like currency in the real estate market. Go from a “good” investor to a “great” investor by following these 10 rules.
2. Set Investment Goals
Set specific & detailed financial goals. Include the # of properties, annual cash flow they generate, type of property, and the location of each. Set parameters on the rates & returns required.
3. Never Speculate
Invest with long-term gains in mind. Do not chase after appreciation. Only invest in prudent value plays where the #’s make sense from the beginning.
4. Invest for Cash Flow
Buy investment property with positive cash-flow. Cash-flow is the glue that keeps your investment together. Equity will grow through appreciation and loan amortization while cash-flow covers operating expenses and debt service on your property.
5. Be Market Agnostic
Become master of recognizing local market trends.There is an element of timing you must consider when choosing a property to invest in. You don’t want to buck the Trend.
6. Take a Top-Down Approach
Always consider investment in light of the market and neighborhood it’s in. Healthy housing markets have low unemployment rates, job growth, population growth etc.
7. Diversify Across Markets
Once you add several properties to your portfolio, diversify your assets to different economic centers and markets. Diversifying across several states helps reduce your “risk” should one market decline for any reason, including out of state ones.
8. Use Professional Property Management
Your time is valuable and should be spent on your family, your career, and looking for more property. Save yourself the liability and time and hire a professional.
9. Maintain Control
Be a direct investor in real estate. Try to avoid ownership from funds, partnerships, or other paper-based investments where you own share or securities of an entity you don’t control.
10. Leverage Your Investment Capital
Real estate is the only investment where you can borrow other people’s money (OPM) to purchase & control income producing property. Meaning, leverage your investment capital into more property purchases using “all cash” leverage magnifing your overall rate-of-return and accelerates your wealth creation.