As we face some significant economic challenges, the stability and growth of the housing market are catching the eyes of many would-be real estate investors. Before diving into real estate investment with dreams of quick cash and easy wealth-building, we have to know what principles guide success in this business.
There’s a simple reality: successful real estate investment isn’t about getting rich quick. If anything, these promises from anyone point to a dubious, risky strategy, if not an outright scam.
Real estate investors must be centered on the right principles, the right guidelines, in order to find lasting wealth and long-term success. When your mind is in the right place, focused on the right things, you will find that investing in real estate offers everything you could want and more.
Here are just a few of those essential principles.
4 Guiding Principles for Successful Real Estate Investors
Buy and Hold is Best
For real estate investors, a buy-and-hold strategy is essential to real, lasting wealth-building through real estate. There are several reasons for this. First and foremost, a buy-and-hold strategy transcends market conditions. The real estate market moves in cycles. The more short-term your strategy, the more beholden you are to that cycle. A flipper has to really time the market to maximize their profits, both in property acquisition and in resale.
When you buy and hold, you have the advantage of being patient. You’re building a portfolio that grows your equity over time. That’s why many investors will hold their properties for decades!
Monthly cash flow combined with that growing equity (thanks to natural appreciation, renovations, and a dwindling mortgage demand) creates lasting wealth in an industry known for its reliability.
Be sure to check out: Why Savvy Real Estate Investors Choose to Buy and Hold
Take Your Time
Too many real estate investors are eager to rush the process. It’s true, the more diverse your portfolio is and the more properties you own, the more wealth you will have. However, each investor must be mindful and intentional in how and when they scale that portfolio. Investors must be prudent. Over-extending your resources can be a recipe for disaster.
Take your time to grow your portfolio. Assess your resources and move when you are comfortable doing so. Add the right properties to your portfolio, not just any opportunity that comes your way. This isn’t to say you can grow risk-free, but it is to say that you should not bow to pressure to jump on the next big thing. Grow your portfolio, have goals in mind but do not stretch yourself beyond what you can handle at any given time.
Mind Your Market
Anyone who is in the real estate industry is no doubt tired of hearing the mantra location, location, location! Even so, it doesn’t make location any less important when it comes to investing in real estate. Location — or rather, your market — holds great influence over your success.
Many investors have the initial instinct to invest in their own local markets. This can work out, but it’s not always the best option. When this happens, it isn’t necessarily because the investor has real experience in the market. They’re just more comfortable with what they think they know, what they can see, and what they can control.
Remote investing with a turnkey company, however, is often the best choice when it comes to targeting ideal investment markets. This is because these companies (such as REI Nation) make a priority of vetting the markets in which they invest.
For our part, we target markets that are poised for long-term growth. That growth should cover economics, population, property values, and rental demand, among other factors. For real estate investors, invest where it makes sense. Don’t hop on any “hot” market just because the competition is stiff and the hype is big. You want markets that you can afford, markets with proven stability and growth, and potential for long-term gains.
Leverage for Success
Leverage makes investing in real estate unique among other forms of investment. The most common form of leverage is that of a bank loan, a mortgage. We’re all familiar — you use a fraction of the cost ( a downpayment ) to purchase a property with a loan. It’s not your money, but you reap the rewards of full ownership.
For investors, utilizing leverage wisely is what allows quicker scaling and equity growth.
However, money isn’t the only thing real estate investors can leverage. Time and experience are also leverageable assets. When a passive investor works with a turnkey company like REI Nation, they leverage the time and experience of property managers, portfolio advisors, customer service experts, real estate analysts, and more.
When you want to be a passive investor, when you want to minimize your risk, leveraging these assets is key!
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