7 Laws of Real Estate Investing Every Potential Investor Should Know
While the world of real estate investing may seem rather glamorous from the outside, this industry can be quite complex and at times, difficult to navigate. If you want to make it in the world of real estate investing, it will take a lot of hard work and determination. You will also want to keep several of these key laws in mind that can help you along the way. Here are seven rules that every new investor should know.
- The Educated Investor Gets the Worm
In the world of real estate investing, nothing is as valuable as knowledge. The more you can educate yourself on your market and on the topic of real estate investing in general, the better. If you are already a good investor, taking the time to really educate yourself can take you to that next level and become a great investor. While talking to others can be a way of getting insight, remember to never blindly follow other people’s advice in this market, you need to put in the work and actually educate yourself and then use that knowledge to take action.
- Never Chase Appreciation
If there is one thing that the whole country should have learned with the last market crash, it is that speculation is extremely dangerous. Never chase the idea that a property will appreciate. Those who purchase an investment, sit back and assume it is going to increase in value are just setting themselves up for failure. You need to be active in your investments. You need to be involved in the process and have a strategy for renovations and ways to add value, otherwise your portfolio will never grow.
- Investing Goals Need to Be Quantifiable
It is a common piece of advice, but one that many who are new to real estate investing fail to follow. You need to set real, measurable goals so you can actually see if you are reaching them.
- Cash Flow is Key
In the world of real estate investments, you need to have cash flow. Don’t buy properties with a breakeven point. You need to have positive cash flow. It not only means a better return on your investment, but it will help you build net worth and give you what you need to invest in more properties in the future.
- Diversify, Diversify, Diversify
You need to diversify your portfolio. Even if you have found success with one type of investment, the more diverse you are the better. This means having a handful of properties across different locations and markets. Just because you found an area you were successful in, once you have 3-5 properties in that area, it is time to move on.
- Professional Property Management is Always a Smart Bet
Unless your actual job is to be a property manager, you should never manage your own investment properties. Paying a professional management company can seem like an added expense, but it is one that is always worth it. It requires a great deal of time and expertise in order to be a great property manager, and ultimately, your time is your most valuable asset.
Keep these real estate investing laws in mind if you are considering entering this market as they can help you along the way during your journey.