So, you have read all the books, you have the money set aside, and you are ready to make that game winning investment. What now? How do you know you are pulling the trigger at the right time and for the right investment? The answer is simple, you don’t! Most people wait and wait for the perfect investment property and miss many of the best deals. Fact is, if you want risk free investments, then investment property is not for you. Every investor should have a model for investing. If your model says yes, and you have the cash, then you should act before the next person does. If the model says maybe, then you should work the deal to yes or let it go. The biggest mistake I see investors make…. the model says no but their “gut” says yes. Every deal doesn’t have to be a home run, but you should avoid foul balls.
How do you build the model? This is the hardest part. I have not written a book, and I don’t know all the acronyms for property investing (matter of fact, I have not even read many of the books), but I always find it amusing when people want to meet with me to learn why I have been successful and spend nearly all our time together telling me what they know (from all the books they have read). Fact is, most of the people who have had success, build the model themselves one block at a time. My advice, start small, find investments that you can afford to lose on. Most real estate investments take time to mature, don’t think you will make your fortune on that perfect investment. Real estate wealth is exponential, starts small, but grows fast as you leverage and grow.
What should your model include? In the beginning, investors should stick to the basics. If you are buying a rental property, understand the location, market, income and costs. Once you think you have those numbers, then reduce the income and increase the cost in your model. If the investment still works, then you should be okay. Ask yourself one question, why would someone be selling a homerun?
Couple important things to consider. One, I always tell investors to own enough units to ensure each month you do not have to come out of pocket to cover costs. Nothing is worse than working your day job to pay for your investments. Also, if you are running out of cash, you will make bad short-sided decisions and could jeopardize your portfolio. Second, seriously consider not managing your own properties. Property management is not easy. Tenant management, controlling maintenance costs and keeping up with the market can not only drain you of energy but could cost you all your margin. There is a difference between good and bad property management, find a good one!
Finally, this is possible! My total investment into my portfolio was less than 5% of the value it created. That means a $25,000 investment could deliver you well over $500,000 increased net worth if you play it right. Put down the book and go find a small investment and dive in, you will have more fun than you can imagine.
Comments