You are new in the real-estate investment business. Here are 6 tips for the newcomer:
1. Buy your own property first
If you are new to real estate investing and you do not own the home you live in, then buy your own property to live in first. You will learn-by-doing everything you need to know about real estate investing from the first row seat. Experience it first hand. Financing is easier and you will get the best tax write-offs.
2. Let numbers talk and not emotions
Do not let fear and greed drive your investment decisions. Have your emotions in check. Dig into the numbers. Research the cost of each investment opportunity beyond just yield and CAP rates. Look at factors like cost of vacancy, maintenance charges, assess the risk profile of tenants and, last but not least, factor in your own risk tolerance.
3. Become comfortable with numbers and read the 3 most important financial statements
Stop being intimidated by numbers and become comfortable with them. You will quickly discover their power. Look at numbers as clues to guide you to discovering the truth and how your property investment is really performing. Get comfortable with reading the 3 most important financial statements (income statement, balance sheet and statements of cash flow), and you’ll be on the right track.
4. Work only with trusted resources
Surround yourself with people you know and trust. You need to have full confidence in the critical people you rely upon throughout the real estate investing process. You might need to do some research first. Find people that are successful in real estate investing and not somewhere else. Determine if they practice what they preach. Look for people who actually follow their own advice. See if you can find out what their sources of their information are. Where is the data coming from? Do they get a commission by pushing you in one direction or another?
5. Start small
Start small but have big goals! Determine your overall big goal and then break it down into smaller steps. Start with the smallest step and keep moving forward. First with little steps, small investments, and then progress to bigger steps. As your experience and confidence grow with each success, you get closer and closer to that big goal.
6. Be patient and follow your long-term target
Do not start to flip a property and take the one-time profit. Create cash-flow and turn the property into a rental cash cow that delivers an ongoing income stream every single month. Focus on your long-term, big goal and that means buying and holding. The same goes for choosing the right investment opportunity. Don’t be in such a rush, so you overlook the red flags and ignore your instincts.
Sven Franssen