I think I’ve taken every real estate investment course and seminar out there. They pretty much all promised me the knowledge and skills to “make me millions” but I’m just being honest when I say that reality proved to be more challenging than that for me. However, years later, I’ve managed to achieve success. A good starting guide like this could have saved me years of learning the hard way.
I’d like to share with you the 10 most important hard earned lessons or what I call real estate investing 101 that I’ve learned along the way through trial and error.
Lesson #1 – Buy equity or a Low payment
Getting a lot more than market value for a property in real estate is rare. Purchasing a property with a discount is the only way to make money in real estate. You can either purchase for a cheap buying price, a cheap monthly payment or a combination of both. You later sell that equity for a higher payment. There’s always a way to get started even if you are investing while keeping your day job.
Lesson #2 – Motivated Sellers
The only way you’re going to get a big discount is by finding a motivated seller. You need to deal only with home owners who don’t want to sell their property but rather owners who must sell their property. Whenever a seller finishes telling you about their property, ask them why they are selling it to determine their level of motivation.
Lesson #3 – A Situation that can fixed
If you can’t resolve the situation the seller is in, then their level of motivation doesn’t mean anything. You may not be able to fix a house that is physically destroyed. If the seller is facing a pending foreclosure, you can typically remedy that situation.
Lesson #4 – Don’t fix homes, fix contracts/financing
Who makes more money from a spin, the bank or the home owner? The home owner actually owns all the liability and the bank really owns the property. You need profitable contracts that work to your benefit.
Lesson #5 – Don’t manage tenants
If you manage tenants, you can’t get wealthy. Measily returns plus a lot of time commitment is what most landlords experience. Selling your equity under creative financing pays about the same as being a landlord but requires a lot less management.
Lesson #6 –Have two or more exit strategies
Buying my first property was more full of excitement than good investing techniques as I didn’t really have an end in mind. Knowing what to do before you buy is the hallmark of every great investor.
Lesson #7 – Don’t buy all the “location, location, location”
If you pay full market value and you’re renting for the long term, location is the most important consideration. If you’re acquiring equity when you buy, the location is largely not a factor. Even the biggest dive around is a good deal if you buy it cheap enough. A discount on a “junker” property is better than a full price nice area. Don’t get sold on a great market, get sold on a great deal.
Lesson #8 – Get the right advice
I took everyone’s investment advice when I was a newbie. A revelation came to me though. If stock brokers knew how to invest, they’d already be rich investors. The people who gave me advice would be using their advice to buy property if they knew what they were talking about. There are tons of successful investors at the local real estate investment clubs who don’t charge a cent for their time.
Lesson #9 – Perform a comparative market analysis
Having a “nice place” that’s close by is how most “investors” select their rental properties. You don’t buy stocks because you can drive to the company and see it. You buy them to turn a profit. Real estate is a business. Perform the correct cash flow and resale options analysis on every deal.
Lesson #10 – Marketing
Business is 90% marketing. Consistent profits only come from a steady marketing campaign. You’ll bring deals to you instead of seeking them out. Marketing is the key to every business and every successful business knows that.
Use these lessons to save yourself some wasted time with bad advice.
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