Business & Merchant
- Last Updated on Thursday, 28 August 2014 17:31
By Roger Dolanch, Broker/Owner
Most local real estate investors are average folks. They are our neighbors. They don't have millions of dollars, well-connected friends, or an excess of free time. However, they do invest in real estate, which makes them a little different than other folks.
The way they invest isn't very complicated, difficult, or time-consuming. Here are three simple investor rules that they follow:
1. Learn Selectively
Learning how to buy that first investment property can be very overwhelming. When investing in real estate, there are a whole lot of different niches you can get into (like single-family homes, multifamily properties, commercial retail stores, etc.) but you don't need to master them all. In the same regard, there are many different strategies you can choose (like long-term buy-and-hold, house flipping, and more) but you don't need to know them, either.
You simply need to pick one niche and one strategy and learn a little about those. That's it.
For example, you might be interested in buying small multifamily properties, like duplexes or triplexes, and hanging on to them until retirement. Suddenly, the vast amount of information out there becomes a lot smaller, and it's much easier to find the information you need.
Additionally, once you narrow your focus of learning to one niche or strategy, it's easier to find individuals who have experience in the kind of investing you want to learn more about. Perhaps you can ask family and friends if they know anyone who is a landlord of small multifamily properties – and then take that investor out to lunch to learn.
2. Start Small
The second rule of investing for regular folks is to start small. Yes, you may want to acquire millions of dollars in real estate to stock your retirement fund, but that million-dollar portfolio starts with one single purchase.
Perhaps it's your goal to buy ten single-family houses over the next five years. You do not need to buy all ten this year, or next. Perhaps you can buy just one this year, while learning how the process works. The year after, you might buy two. Each year, you become more and more familiar with the process and can buy more and more properties.
The great part about this kind of learning is that it happens naturally. You don't need to feel overwhelmed, because those other properties will come in time. The knowledge and experience will come slowly, so let it. Starting small is not only necessary, but it's also a good thing.
3. Buy Only the Best Deals
Answer one quick question: Would you rather own ten properties that broke even each month, or own one property that generates $1,000 per month? Hopefully you picked the one property, because wealth is built buying great deals. When you start shopping for your next real estate deal, focus intently on only buying the best deals. Remember these three simple words: Quality over quantity.
Look for properties in good neighborhoods that provide good monthly cash flow. Estimate the future potential of a property very carefully and conservatively:
• If you think you might spend $50 per month on repairs, perhaps you should double that just to be safe.
• Not sure how much the property will rent for? Aim low – and if it turns out better than you estimated you can celebrate.
• Nervous about the potential tax increase in your city? Plan for the worst-case scenario.
Buying the best deals will allow you to spend less time managing properties, give you less stress while owning them, and help you build wealth even faster. Remember: Quality over quantity.
You don't need to be exceptionally brilliant, rich, or connected to invest in real estate. Instead, you just need to follow these rules. Learning selectively can help you get off the couch and investing with less hassle, starting small can keep you from getting overwhelmed, and buying amazing deals will help ensure you achieve your financial goals. Isn't it time to start planning for an above-average financial future?