Real estate investing is all the rage right now with people involved in the Carlton Sheets program spending money on courses to find out how they can make money without investing in real estate. This article hopes to help you create a sort of mental picture of five key principles that can help you make more money in real estate today.
Principle #1- Money is made in the purchase
Real estate investing is like stock value investing and you want to buy the real estate during a real estate downturn period. The reason for this is so that you can get a great capital appreciation when the real estate market heats up again.
Spending time on your real estate valuation is critical, because if you can’t make sure the math is a viable proposition, there’s no way your real estate investment is going to be a good one.
Principle #2- Monitor Cash Flow
Investing in real estate typically has monthly rental income that is then used to pay mortgage payments and other problems with the building, such as a leaky roof. Therefore, you should keep a close eye on interest rate hikes as they can erode any calculated return on investment quite quickly. Once you have enough cash on hand, it is suggested that you put some of it away in an emergency fund in case some of the rental tenants don’t renovate their property and then take the rest and consider investing in another real estate investment property.
Principle #3- Take advantage of other people’s time
Remember that no one can do everything, so the key is to focus on what you do best. If negotiating deals is your strength, spend time searching for properties and then have professionals and contractors handle the rest of the deal for you. Similarly, if you are good at decorating properties, find deals and focus on the interior design of the property. By concentrating on what you do best and having other people do the rest of the work, you are putting your time to good use and can earn more money with each new real estate investment you make. Take the time to build your team of advisors and employees who work for you and you’ll see your profits start to add up. Remember that by rewarding them financially, you will get a group of dedicated people who will help you make more money on your real estate investment.
Principle #4: Learn to use leverage with a good cash balance for a rainy day
Did you know that many real estate investors started with very little money to invest? Even big real estate developers like Donald Trump have learned the power of leverage when investing in real estate deals. He wants to take advantage of everything he can so he can control property that is worth many times what he owns. However, remember to keep an emergency fund that contains a portion of your rental payments so that you can protect yourself against a possible period when occupancy of units in your real estate investment is low. Leverage, when used well, can make a lot of money, but if poorly managed, it will bankrupt you. Therefore, planning your cash flow and learning how to use debt is essential before starting a serious real estate investment.
Principle #5: Spend time networking with real estate professionals
Do you want the latest real estate investment deals? The best way to learn from them is to join your local group of real estate professionals and become friends with them. Learn some real estate investment lingo and take the time to befriend them because they are your eyes and ears on the ground and can tell you about recent rental, property, and infrastructure developments and changes in your geographic location. Having the first mover advantage is what many great real estate investors have and by spending time networking with real estate brokers you will substantially close the gap.
In conclusion, take time to review these five principles and determine how they can be applied to your real estate investment and you could start to see an increase in your real estate income.
By Joel Teo 2006 All rights reserved