Experience is the best teacher. The below rules are the top rules of a successful real estate investor. Over time, these rules have yielded results and testimonials.
Set Investment Goals as a Real Estate Investor
Real estate investments can get overwhelming; even experts might feel this way. However, a goal-oriented investor gets to stay ahead of his game. Actively planning out methods to meet goals is a good way to keep on track. Your probabilities of achieving financial independence increase when you write down precise and detailed goals. These goals can be as simple as writing down the intended number of properties to acquire on an annual basis, the specific type of property, the annual cash flow from the property, and the location of the property. You can also include a rough sketch of the rates of return.
Coming in with a long-term perspective is different from speculating on quick short-term yields in appreciation. You will likely not be able to predict when a market goes to its peak, and you only be to find out about this in 6 to 9 months. Always associate with reasonable numbers and avoid speculation.
Invest for Cash Flow
Except in extremely rare cases, always purchase investment properties with promising cash flows. Cash flow is the factor that enables your investment to stay together, as it will cover the overall operating expenses and debt service on your property. As a real estate investor, your cash flow rise can be measured over time by the extra income reaped off an acquired property, after all expenses and costs have been discounted.
Diversify Across Markets
Learn to focus on one market at a time, and accumulate a range of 3 to 5 income properties per market. Upon the successful addition of those 3 to 5 properties to your portfolio, you can transfer your attention to a market that is geographically different from the previous market. This might mean diversifying into a different state. One of the fundamental reasons for diversification within the same sector is that your properties are spread out across various economic and geographical centers. Each real estate market falls on the local level, and each housing market stands separately from another. Diversifying across multiple states helps you reduce your risk, should one market crash for any reason. These reasons might include increased unemployment, increased taxes, etc.
Maintaining awareness of your properties keeps you ahead of the game. You can also see any shortcomings in your investments. Finally, avoid speculation and keep your focus on your goals.