Back HomeKeith and Kinsey’s 5 Rules of Property Investing
September 3rd, 2011 by keithandkinseyAfter 11 years of owning investment property, I’ve made some great decisions, made some mistakes, experienced an up market, and experienced a down market. After all this, I’ve developed 5 core rules of buying investment properties. Most of these rules can be applied to any type of investing too.
Educate yourself
Learn all you can about the type of investment you are thinking about making (duplex, 4-unit, mutual fund, etc.) and how to manage it in the future. Always ask for advice from someone who is more experienced than you. Learn from the mistakes of more experienced people, and hopefully you can avoid mistakes of your own. Never invest in something you don’t understand.
Buy or Sell through someone that is an investor as well
If you are using a real estate agent to buy or sell an investment property, make sure the agent has investment property experience. There is a huge difference between buying or selling your home and buying or selling an investment property.
Maintain Control
Be a direct investor so that you can maintain control of your investment. Do not invest in someone else’s deal. If you don’t have the authority to make key decisions, you’re putting yourself at risk. If you do any type of partnership investing, be extremely careful and get it all in writing. Be prepared to have a backup plan if the partnership dissolves.
Don’t Gamble
Take the risk out of your investments by having multiple exit strategies. If you are doing a rehab or flip, plan to price the property below market value, be conservative with your numbers, and make sure the property will cash flow if you have to rent it. If you are buying a long term rental, make absolutely sure your property will have positive cash flow. You’re asking for trouble if you have to put money into the deal on a monthly basis.
Don’t be attached
An investment is just that – an investment. Take the personal emotion out of it and treat it like a business. You’ll be much more successful looking at it from the business side of any investment rather than the emotional side. Also, don’t be attached to one housing market. Some markets don’t make sense for investment properties. You may be better off investing elsewhere.
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Great stuff you two. Thanks for helping me understand these rules more and more each day!
[…] by the numbers should have been our best performer, but it ended up being our worst. One of my 5 rules of investing is maintaining control, and I failed at that on this one. You lose a lot of control when you are […]