Cardinal rules of real estate – Real Estate Investment


1. Speculation does not invest

Speculation is more like gambling because you put all your eggs in one basket, appreciating the value of the house.

You don’t have an emergency plan. Cash flow and mortgage payments create a return on investment in any market. Specification buying involves depositing a deposit on a condo in two years, hoping that the unit will be worth more and that you can sell it before the work is finished.

Speculation is buying a property that doesn’t cover your rent every month because you believe in the area and have appreciation potential. I learned this lesson the hard way in 2007; by the time my condominium buildings were constructed in 2010, they had dropped more than my equity.

I was “underwater” and forced to close anyway. It was $ 150,000 in tuition fees.

2. There are no good or bad markets – only good or bad tactics

For example, there are specific tactics that work during a recession, such as swapping, because more expensive homes are hit the hardest. Or negotiate creative terms like seller financing.

These same tactics will not work in a boom. Here, you would use a buy-repair-sell strategy.

In a period of recovery, the period between the end of the crisis and the next boom, it’s time to use a buying and conservation tactic, and even more advanced strategies like rent with option to buy and sales agreements.

It’s also a great time to start a real estate development project

The key is to know where you are at all times. The good news is that we always know where we are going based on where we come from; it’s always going to Boom-Slump-Recovery.

In this order, cyclically. If you’ve been in crisis for a while, get ready, the recovery is on.

3. Your team counts

You have to build a dream team around you.

This is one of the main reasons why I chose to join the first real estate investment network in Canada – R.E.I.N. It’s in rooms like this that you can rub shoulders with professionals who specialize in this sort of thing. Building a dream team is one of the most important factors in my success as an investor.

You want professionals who specialize in helping achieve financial freedom through real estate investing.

Find an investor-oriented real estate agent and ask them to direct you to a great mortgage broker, lawyer, and insurance agent.

These three, in collaboration with your ace property manager, are the group of professionals who will take advantage of the highest peaks.

Getting it right is the difference between buying a few properties with varying degrees of success and building a well-managed real estate empire that creates multigenerational wealth without wasting your precious time.

4. You get what you trade

Having a sharp agent who can negotiate a good deal for you is one thing, but good negotiation starts with you. You have to become a master in the art of negotiation. Check the ego and emotion at the door and let the process take place over time, never be in a hurry.

Also, don’t forget that a real estate negotiation shouldn’t just be about the price. Terms are often more important than dollars. Find out what’s important to the other party and try to solve their problems while you create a wonderful business for yourself.

Dates, inclusions, enhancements and even funding options are all to be negotiated.

If you don’t ask, you don’t get.

5. Find your niche

Don’t try to be in too many different arenas at once. Find a particular type of property and become an expert in this area. Maybe these are houses with a suite in the basement, maybe it’s a condo that allows short term rentals, maybe it’s a small multi-family or a light industry.

The key is to find and control a groove. It is very difficult to build a solid wallet with a mixed bag of all of the above, but choose one and really master it; each transaction is better than the next and you become the most confident investor possible.

6. You don’t need to invest where you live

Most people like the idea of ​​being able to drive their investment and kick or feel it. And as pleasant as it is, where you live is not necessarily the best option for you.

Proximity to your home is much less important than positive cash flow in a market with strong economic fundamentals for growing rents and market value. Plus, you might be at the end of the home boom, but one more province has just emerged from a long crisis.

The opportunity for the next five years is much greater in the neighboring province solely because of their position in the cycle. A strong team of local professionals can be found to help you make a smart investment once you locate the area with the best opportunity

7. Graduate for the economy of scale

Once you have mastered the single family home game and have reached the limit of your ability to finance houses, this usually happens in five properties, as banks usually limit the number of properties you can finance.

Aside from mortgages, the main reason for switching to multi-family investment – more than five units in one security – is for economies of scale.

You can get cheaper property management, a roof on an eight-unit building costs less than four separate roofing jobs, as with a boiler system compared to four individual furnaces.

Having multiple units in one place streamlines and simplifies your portfolio.

8. More numbers don’t equal greater risk

It’s counterintuitive, but a million dollar quadruplex is less risky than a $ 500,000 property, and a $ 5 million apartment building is even less risky than a quadruplex and so right now. As prices go up, the risk goes down. The main reason is the diversified risk.

The more units, the less the risk of falling into a negative cash flow, such as three out of eight units, could suddenly be vacant and you could still cover your mortgage.

If your house or apartment suddenly becomes vacant, you must pay the full mortgage payment until a new tenant is placed.

9. Master joint ventures

At any given time, each investor reaches a cap on what they can accomplish on their own. Ultimately, everyone will lack one of the three ingredients necessary to grow their portfolio.

The most common is capital for down payments; once you’ve deployed your piece of liquid capital, it takes a long time to build up another down payment. Other times, the issue is not capital, but rather access to finance.

Each investor eventually reaches their limit on the number of mortgages they can convince the bank to grant them.

And then there is time and expertise, the third but equally important ingredient. Ultimately, your time and expertise can only be stretched so thin.

When you reach this point, it’s time to master the art of joint ventures. For every person who overflows with money but without extra time or expertise to lose, there is someone with the capacity and expertise to execute who has no more capital.

It is a match made in paradise and, with the right documentation and expectations, can be a mutually beneficial partnership that serves all parties for years and allows investors to reach new heights in their careers.

10. Money is king, but queen of cash flow

Yes, money is king, but what really holds the power of your success and shaping the lifestyle of your dreams is creating cash flow.

For example, you could have half a million dollars and buy a nice high-rise condo for a million with your money, rent it at $ 3,000 / month and you and find yourself in a negative monthly cash situation. This same $ 500,000 invested in a multi-family building of $ 2 million will bring in nearly $ 15,000 in income per month; it’s five times more income and positive cash flow each month that can pay for your lifestyle.

11. Strength of appreciation

One of the best aspects of real estate as an investment class is the ability to influence the value of the asset by improving it. Take advantage of renovations of hanging fruits like soil and paint to instantly increase the value. Sweat your equity in landscaping and cosmetic projects.

Some properties allow you to release value by developing them further, adding a suite or rezoning for another use. There are many ways to influence the value of your property.

Even if you are currently stuck in financial terms, you can give a boost to your portfolio, and therefore to your net worth, simply by being strategic

12. Stand for wealth

Keep the best for last. You can make a lot of money by buying, repairing and selling goods. Many people do this as their full time job.

The challenge here is that it will always be their full time job as they depend on these benefits for a living. Real estate is great for making a profit, but real magic is what happens when you own it over time.

Multigenerational wealth is created by holding hard assets like real estate for decades.

Consider that a $ 2.5 million real estate portfolio today in which you have invested less than $ 500,000 of your own capital, using 80/20 leverage, will, in 30 years, be an entirely paid approximately $ 10 million (real estate doubles every 15 years historically) and generates more than $ 500,000 in rental profits each year.


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