6 Easy Guidelines for Profitable Actual Property Funding
There is a lot to know about real estate investing, from finding the right market to taxes. It seems like there is always a new topic to immerse yourself in. Whether you're new to the real estate industry or you've been in the game for years, there's no denying that things can feel a little overwhelming at times.
Most of us are still working clinically, and for those who work full-time, it definitely may feel like you don't have enough bandwidth to learn everything. It might also feel like there are so many other barriers that we face in learning to invest.
However, I have found that these obstacles are often bigger in our minds than in reality. After spending a ton of time in the real estate investment community, I've met so many different busy doctors who have taken action and have become quite successful in doing it.
I find those who are struggling to get started are caught up in the trivialities of investing. In this case, I think it can help to take a step back and focus on the simple things.
Success leaves clues, and here are six simple rules that successful real estate investors follow.
Do a thorough due diligence
Obviously, proper due diligence is the most important part of the investment process – no one wants to get stuck on a bad investment.
I know that I use the words "passive income" and "real estate" in the same sentence quite a lot, but I don't want anyone to get the wrong idea. No NULL work is required. It does take some work up front and then you can continue to reap ongoing rewards.
Here, all you need to do is roll up your sleeves and get to work. Whenever you find a particular business, be it a single family home or an apartment complex, you need to research the market, the sponsor, and understand the most important metric: cash flow.
You may have heard the common phrase "you make money when you buy". I think that's largely true. Strategy while holding the property is important. However, if you make sure that you make a wise decision before making any investment, you are on the road to success.
By adding up all of the potential expenses such as repairs, maintenance, property management, and insurance, you can subtract these expenses from the potential rental income. This gives you a good idea of how much income the property will generate.
All of this may seem basic, and it is, but the key is to always stick to that “cash flow” mentality. When exploring a particular property, always keep in mind how it can contribute to your passive income goals.
For more information on calculating cash flow, see this post.
Diversify in different markets
When it comes to stocks, we all know the importance of diversification. If there's one thing you never want to do, put all your eggs in one basket.
The same applies to real estate investments. While buying a rental property or two in your own market isn't a bad idea, once you start looking for additional property, you should look for other markets.
Ideally, you would diversify into different states. In this way, the other states can slacken if one state's market takes a hit. This is probably the best way to minimize risk across the board.
Of course, buying a property outside of the state can be intimidating. After all, buying is a lot easier when you are accessible by car. However, thanks to modern technology and services like turnkey investing, this is a lot easier than you might think.
In fact, I made my first out of state investment in my call room which you can read about Here. Also, find out how to invest in turnkey real estate in another state Here.
Get a good property manager
"I'd invest in real estate, but I don't want to open a tenant's bathroom at 3 a.m."
This is an objection that I hear quite often and that I fully understand. For some people, this is what life is like as a landlord.
However, if you are investing in real estate for passive income, and ultimately passive income, there is a great way to bypass those nightly maintenance calls: hire a good property manager.
Sure, paying a property manager will hurt your profits, but it's more than worth it in my opinion. I treat it like an investment. Thanks to my property manager, I only have to occasionally reply to emails and watch the rental checks come in.
Remember, your time is worth far more than what you would pay someone to manage your investment.
How do you choose a good property manager? I'm glad you asked. I wrote a whole post about it that you can find exactly here!
Think long term
At some point between the beginning of the journey into financial freedom and reaching the end, there is a period of time (sometimes more than one) that you rush to make a difference. In the middle, it's easy to lose sight of your ultimate goal.
The key to keeping your motivation up is to always keep your ideal life in your life first. Any goal you set for yourself, short or long term, should be viewed as a stepping stone to the life you desire.
This makes it easy not only to keep working towards those goals, but also to help you sort out distractions. If something is taking up extra time in your life, just ask yourself, "How can I achieve my goals?" If it doesn't, it's a lot easier to cut it out.
Of course there is a balance there, but ultimately, the best way to be successful in the short term is to always think long term.
Embrace lifelong learning
I've said this many times before, but I cannot emphasize enough the importance of constantly searching for knowledge. We all know that knowledge is power – the power to achieve your goals, make things happen, and ignore your inner doubts.
However, to me, constant learning has the most direct impact on your success of anything we've talked about so far.
Listen to podcasts, read books, attend conferences (online or in person), talk to like-minded people – whichever method you prefer, always deal with the topics that will help you achieve your goals. Even if you already know the advantages and disadvantages of a topic, there is always something new!
Accept that you cannot control everything
We've discussed some great steps you can take to ultimately successfully invest in real estate. But when it comes down to it, between researching, learning, hiring – there is only so much you can do. At a certain point what will happen will happen.
Relieve yourself. Realize that there will always be things that are out of your control – and that's okay. Instead, protect your peace of mind by focusing on things she can control. Don't bear the weight of the world alone!
Life is all about changing course and being resourceful enough to get back on track.
The road to financial freedom will have its ups and downs and there will be external factors that you simply cannot take into account. Accept it, learn from it, and move on. I can't tell you how much easier it is.
Real estate investments are not always the easiest thing to do. It requires some preliminary work, especially setting up the systems that ultimately automate almost everything.
By breaking down your investments into a few small steps and focusing on a few core ideas, it will become a lot easier to stay on the right track. If you are already investing: keep it up! And if you haven't started yet, what are you waiting for? Don't wait – make it happen!