6 Real Estate Investing Principles You Can’t Live Without

There are always new real estate investing “tricks” and techniques that you may want to  know, as well as new ways of doing things better.  But, before all of these, you need to make sure you understand the key foundational principles.

Here are six key fundamentals that every investor needs to know.

Build Relationships

Real estate investing is about relationships. People are your most valuable resource, and the more of them you know, the more likely you are to find good properties to buy, or buyers for your properties. ask people for their names, and if your memory is poor, take notes. Know the right people too, including a real estate agents/brokers who gets many listings of the type you are interested in. Wouldn’t it be nice if you were the one he/she called first?

Understand the Numbers

Know and understand the relevant numbers. When you look at a rental property, for example, you should be thinking about the income, the expenses, and the capitalization rate, or “cap rate.” Imagine how certain changes would allow you to raise the income, and what that would do to the value. A “feeling” about a property, without understanding the numbers, gets many investors into trouble.

Reduce Risk

Look for and use methods to reduce risk. Have inspection, financing, and other contingency clauses in the offer, so you’ll get your deposit back when a deal falls through. Consider your exit strategy before you buy, and have a “plan B.” Value real estate using comparables or cap rates, not “hunches.” Buy through your corporation or LLC.

Be Prepared

Be prepared for real estate investing.  Have business cards, pen and paper on you at all times.  You never know when you’ll see a property for sale, or hear about one.  Sometimes, when you mention that you invest in real estate, sellers, buyers and other investors suddenly appear with information, opinions, and sometimes even good deals.  Be prepared.

Set Goals

Create action-oriented goals, not just wishes.  For example, require yourself to look at a certain number of properties per week, and maybe even to write a certain number of offers each month.  Set goals for all sorts of little steps, like making six phone calls per week, checking online listings twice per week, and so on.  Action creates momentum.  Repeated action creates habits, and good habits lead to more successful real estate investing.

Education

Keep getting educated, and using that education.  Learning more from books, magazines, websites, blogs, podcasts and even CDs is a great idea, as long as you spend as much time doing something as reading about it.  Some of us let the interest and enjoyment of reading about investing get in the way of actually investing.  Good information is crucial, but it should lead to good real estate investing.

Grasping a few of the essential basics will be invaluable to the success of your future real estate investing endeavors.  Building upon the fundamentals will help build a strong foundation and make the journey that much more exciting and profitable.