Real Estate Investments are investments that are designed to either create cash flow, or growth. It’s rare that you’ll get both out of the same investment. Reason for that is if you are highly leveraged, you are creating wealth for the future, but the debt payments you’re making are inhibiting your ability to cash flow. And if you use cash to buy property without debt, you’ll have a lot of cash flow but then you’re not creating nearly as much wealth over time. If you buy properly however, you can make a good living and create excellent wealth.
As a real estate investor, one of the most important things that you’ll need to do to create success, is to reduce the risk that you face. The best ways to accomplish this is to make sure you follow the 4 main jobs of a real estate investor.
First, as a Real Estate Investor you generate leads. Without generating leads, you have nothing. No business. Nada. Before you worry about building a buyers list, or building a team of people to work with you, you should start generating leads. Specifically property owners who want or need to sell their property.
The second job of a real estate investor is to analyze the deal. This includes doing your due diligence on finding out what is true about the property and everything relating to it. You should not just take the seller’s word for anything. Verify everything. The most important part of this step however, is knowing what will happen in step 4.
The third job of a real estate investor is to make the offer. A lot of new investors are afraid to do this, because they don’t know what they’ll do if the offer gets accepted! The key is to make sure step 2 was done properly so that if your offer is accepted, you know that you’ll be able to make a profit.
The fourth step is to process the property. This means that if you goal is to fix and flip it, then you will do the steps required to fix the property up, market it for sale, and then sell it. If you intended to buy and hold it as a rental, then you will do the steps required there. No matter what your goal is, it’s important to know what your goal is before you start. If you don’t have a target, you’ll miss every time. It’s also important to have several backup exit strategies just in case things go south. I know this from personal experience!
The next thing to understand in real estate is that many people out there are doing stupid and illegal things. The kicker is that most of these people doing stupid and illegal things, are not doing them because they want to be evil, but because they’re ignorant. Ignorance is rampant because people aren’t properly educated and don’t do enough research about the situation that they’re in. It is extremely important for you as an investor to make sure you don’t fall into that crowd. A little bit of time and effort spent now to make sure that what you’re doing is neither stupid nor illegal can save you a lot of pain, money and headache later on.