10 Real Estate Investor Commandments
Summary: There are a lot of rules when it comes to real estate but there are ten that should never be broken. These are 10 real estate investor commandments.<br> This is real estate month so we want to cover some of the most important rules to follow if you want to become a successful real estate investor.<br> 1. Have a Strategy<br> Jack of all trades and master of none applies to real estate investing too. There are lots of niches in real estate investing, house flippers, buy and hold, cash flow investors, type of property (we had a guest who invested solely in <a href="https://www.listenmoneymatters.com/mobile-home-investing/">trailer parks</a>), types of tenets (our contributor Allison likes to rent <a href="https://www.listenmoneymatters.com/go/roofstock/">turnkey properties</a> to grad students), certain areas of the country.<br> If you are trying your hand at a lot of different niches, you are never going to learn enough about any of them to be an expert and optimize your investments. Choose one niche, learn everything you can about it, and stick to it.<br> 2. Know Your Requirements<br> You have a relatively short list of requirements to meet when you are shopping for a home to live in compared to shopping for an investment property.<br> When you are buying rental property you have to consider price, what the cash flow needs to be, the average appreciation for the area, the age of the home, how much work it needs, how much reserve you need to have, the vacancy rate, what the property taxes are, is there an HOA, the quality of the neighborhood, your you’re going to rent to. Gah!<br> There are a lot of factors to consider and everyone will have their own requirements but the point is, once those requirements are set, you must stick to them. Don’t be tempted by a place that meets most of them or comes close to the numbers you set. You set these requirements for a reason and they’re called requirements for a reason. <br> 3. Do Your Own Research<br> You can use a company like <a href="https://www.listenmoneymatters.com/go/roofstock/">Roofstock</a> to handle the whole process of finding, buying, owning, and managing a rental property for you but you still must do your own research. Why? Because no one will ever care more about your money than you.<br> Nearly all of the research you need to do to choose an investment property can be done online. You can do a lot of it through the tool Andrew created, <a href="https://simplewealth.co/">Simple Wealth.</a><br> 4. Be Skeptical<br> Do you know who got a really good deal on a house? The Lutz family. A super cheap price for a fully furnished home right on the water. What was the catch? It was where some months previous, Ronald DeFeo had murdered his entire family. The house, of course, is the house the Amityville Horror book and movies were based on. (The whole thing was a hoax but the point stands).<br> There is no such thing as a good deal. Everyone is in real estate to make money so who is selling you such a good deal? Is it an LLC, a person, how long has that person or entity owned it, why are they selling it? Could be full of old blood stains and demonic pigs named Jody.<br> <br> 5. There is Safety in Cash Flow<br> The cash flow of a property is the total income (rent) generated from the property minus the total expenses of the property including taxes, repairs, the cost of the property management company, etc.<br> If your property rents for $1,200 per month and your expenses are $1,100 per month, the cash flow is $100 per month. How much cash flow you need depends on lots of factors but having a positive cash flow is a commandment for a low-risk investment.<br> Well, duh! But sometimes commandments are obvious. Buying a home with good cash flow is the one of the lowest risk investments you can make in real estate. Some investors operate differently. They buy speculative properties without regard to negative cash flow.
