Most experienced real estate investors (REI) know the 3 rules-of-thumb for maintaining and growing their real estate business. They know these 3 important rules because they're approaching or have surpassed the "half-life" of most REI's = at/neat 5 years of investing in real estate. These experienced investors treat REI as a business, whether they work part-time or full-time as an investor and, like all businesses, they are constantly reminded of these 3 rules when they pay their mortgages each month, or repair a leaking faucet, or start screening tenants for their (now) vacant property.
Many "newbies" often jump into REI with great enthusiasm and high expectations after watching certain late-night infomercials, or after attending an introductory REI seminar, or after discussing the rewards of REI with a neighbor or colleague. Eager to get involved in REI, they buy a house "wrong" then realize their mistake as their financial condition suffers. If their first REI venture results in large financial losses, they often get "out-of-the-game", never to return to real estate investing. They would be well served by considering these 3 rules of real estate investing:
1. Cash Is King: You will run out of your own money before you run out of good deals, so conserve your cash and use Other Peoples Money (OPM) to buy & renovate property. If you plan to rent/lease the house for several years, then consider refinancing the property to pull-out your rehab costs so that money can be re-used for your next purchase.
2. You Make Your Money When You Buy: You must have adequate financial "spread" between the After-Repaired-Value (ARV) and the actual purchase price for each property you buy. It costs money to buy a house, it costs money to fix-it-up, and it costs money to implement your exit strategy. The money you spend is YOUR money, whether obtained from your savings account, or obtained from a loan that you must re-pay. If you decide to re-sell the house after fix-up, it costs money to sell that renovated property. As such, buy the property "right" and make sure YOU get paid when you re-sell the house.
3. Time Management: Participating in real estate investing can run you ragged! There's just not enough time in each day to accomplish all the tasks needed to succeed in REI. So, form a team to help your time management. Find a local real estate agent to find motivated sellers so you can make a lot of written offers on a regular basis. Find local contractors to paint the house, replace old light fixtures, and make general repairs - - so you don't have to. Re-use that real estate agent to re-sell that renovated house - - quickly! Apply your time to manage 10 people, rather then trying to do the job of those 10 people - - all by yourself!
By following these 3 basic rules, you can and will succeed as a real estate investor. Just recall these 3 rules each time you make that monthly mortgage payment so they are burned into your mind and into your future actions. Good Luck!
As a real estate agent, Bob works with HomeOwners who face impending foreclosure and with investors who purchase REO properties located in the north/northwest suburbs of Atlanta, Georgia. If your current REI market is financially unattainable (prices too high? Or does not cash-flow?) or has experienced downward pressures, please consider investing in Atlanta - - you'll be glad you did! Call Bob Garvey: 678-445-5544 or e-mail: BobGarvey@REMAX.net anytime, to discuss your REI strategies. We look forward to hearing from you!
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