Purchasing real estate can be a tricky endeavor. It can take years of experience and some hard learned lessons from common (and not so common) failures in order to get it right. It is mandatory you build a team of professionals and obtain the knowledge and experience to guide them towards your specific needs and desires.
Without this team in place you are destined to make mistakes that could cost you your career.
Most people think real estate investing is simple. They think there’s nothing more than making a low offer on a property and then turning around, slapping a tenant in it and collecting a massive income check every month.
Nothing could be further from the truth. There’s a lot that goes into it before you can get something out of it.
First off, there’s the necessity for knowing and understanding your exit strategy. And it shouldn’t be something you just read in a manual. It should be based on your experience, the property, the financing and the one who will be paying you for the opportunity to live in your property.
Let me give you some examples of things that can go wrong and some lessons I have learned from. They say a smart man learns from his mistakes, but a wise man learns from the mistakes of others. Amen…
What to Invest In
First off, statistics have shown that some of the best investments right now are income properties or rentals. We’ll talk about this in a bit more detail later on. Suffice it to say for now that it doesn’t matter what kind of real estate you are interested in learning, – short sales, foreclosures, rehabbing, house flipping, rentals, subject to, commercial etc.–you’re going to deal with the same issues I describe below.
This is simply because real estate investing almost always entails two things: actual buildings and/or houses and dealing with other people.
First, you must fulfill the basic criteria in order to obtain a deal. The criteria can either be cash, knowledge or time. With time you are working for someone else (think wholesaling or “bird-dogging”). You may be running around finding deals with the minimum knowledge given to you by someone who is calling the shots and of course, getting paid the most.
If you have knowledge, you still may not have the time or cash to purchase and facilitate an acquisition.
And if you do have cash, you better be prepared to look out for yourself because cash is King and everyone wants to be the King!
One thing that you should also consider is that whatever you learn must be in alignment with your strengths and weaknesses. For example, if you want to fix up a property, do you have the skills needed to swing a hammer? To understand electrical and plumbing?
If you are working with builders in Sydney, do you have the ability to be a tough negotiator in order to deal with them and all of the employees who could cause the job to get botched or delayed? Be honest with yourself, it’s not going to do you any good to delude yourself with overly positive thinking. Positive thinking is great, but it doesn’t compare to a bucket with three handles to results.
Now let’s talk about another asset you may have that can be pretty powerful. That asset is “Credit”. If you have good credit, you’ll see that you have more options even if you don’t have cash. But there’s a downside with today’s mortgage market that you should know first.