10 EASY RULES FOR INVESTING IN REAL ESTATE AND KEEPING YOUR SANITY/ MONEY

Having an investment property or multiple investment properties can be a great way to financially leverage yourself. Here are 10 rules to keep in mind BEFORE deciding to take the plunge.

1. DO YOUR HOMEWORK

Take the time to learn everything you can about your investment and everything included after the sale. Talk to your agent, odds are they have one or more investment properties and can give you a “real life” talk on what to expect. Read the books, take a class at your local community college, listen to podcasts, etc…

2. KNOW YOUR NICHE AND STRATEGY

In order to maintain sanity and not get completely overwhelmed, first establish your niche (single family, apartment, vacation rental etc…) Pick one and really understand that niche. Come up with a strategy or business plan for your investment. The real estate market cannot be foretold, but it is possible to narrow in on what your expect within a certain margin. Are you going to make improvements? Is the projected income of the property with/ without these improvements enough to make sense?

3. DON’T INVEST IN SOMETHING YOU DON’T FULLY UNDERSTAND

If you are going to put your money on the line, it is best to know it backwards and forwards. What are the tax consequences? Will it make sense with my current investments? What are my legal obligations as a landlord? What can I be liable for if something happens? It is best
to make this investment with both eyes open.

4. WHEN IN DOUBT, PARTNER UP

There are two ways to look at a partnership. 1. You have to share half your profits. 2. You get to share half your risk.
I would partner up with someone who has become as exceedingly knowledgeable about this investment as you have. Make the decision together and then share information. This makes the homework half as much work.

5. DON’T OVER-EXTEND YOURSELF

Keep your ego in check when making investments. What will happen in an economic downturn? How will you manage that without losing sleep or your shirt? Make conservative and carefully thought out decisions.

6. DON’T ACT BIGGER THAN YOU ARE

Admit to yourself that you HAVE limits. If you can’t afford it, you can’t afford it. Make regular appointments with reality when you think to yourself, “Geez, this rental thing is easy. I can handle a couple more. I’ll make it work”. No. Accept your position. Be happy with what you have and grateful that it is easy (if it is). If you have a golden goose, make sure to take good care of it.

7. LISTEN TO PEOPLE MORE EXPERIENCED THAN YOU

I can’t say enough about finding an experienced realtor (like those at the DiVito Dream Makers) and using them as a resource for valuable first hand information. Talk to others who have invested in similar properties. What were their challenges? What did they learn from their mistakes? Find your mentor.

8. DON’T SPEND BEFORE YOU EARN

The minute you start making a profit on your investment, don’t go out and blow it. Be conservative, put it away, keep it safe. You may need it one day. Also, don’t sell yourself short! Save it up and do something truly extraordinary with it one day that you never thought you’d be able to.

9. DON’T INGORE THE NUMBERS

Again with the regular appointments with reality. Just because you think your property is better than Tom’s across the street, doesn’t make it so. Justifying putting in a new countertop that costs 3 months of rent, doesn’t make it a good idea because you think its just soooo gorgeous. “Trust me, it’ll be worth it when people see how beautiful it is!”. Think with your head, not your heart.

10. KNOW WHY

Always remember WHY you are investing in real estate. If you are investing so you can afford to stay home with your kids instead of working, then make sure you are doing just that. If your constantly on the phone or computer dealing with issues and not actually spending time with your kids, then you’ve missed something there. Make obtainable goals and stick to them.