Throughout my career, I’ve studied wealthy people, their methodologies and strategies.
My advice to you, is to study in-depth and emulate one wealthy, successful person. Study everything you can about them. What they’ve done, what they haven’t done, their speeches, interviews, books – everything you can find out about them.
For example, Warren Buffett’s information and passion about investing affected me in a huge way. It was his advice that led me to start investing in real estate.
His opinion on Investing:
1. DLM. Don’t Lose Money! Invest in sure things. Don’t speculate.
2. Cash Flow. Invest for cash flow.
3. Long Term. Be in the investment for the long term. Don’t invest in the quick thing. Invest in the sure thing.
Since I’ve started investing in real estate I’ve learned a lot about the industry. I’ve gained a tremendous amount of knowledge. Here are my top five real estate tips:
1) Know Your Market
Investing in Orlando, Florida, is very different than the Miami area. You need to know the property and location.
Each suburb is extremely different. Know the market done to the micro-level.
2) Never Invest in One Door
Investing in a house, duplex or a small property is not going to generate enough cash flow to cover the deal’s debt, your management time or generate passive income. My rule of thumb, always invest in 16-units or more.
That scale gives you enough cushion to cover your debt, management and leaves positive cash flow.
3) Know Your Debt Partner
In this case, you need to know your bank. You need to understand the terms offered, what the bank’s strengths are, their area of specialty, etc.
For example, if your bank partner specializes in single-family homes, they wouldn’t be a good partner for larger multi-family unit deal.
4) Calculate Returns Over Years
Never think short term. Don’t think in months. You need to think long-term and what cash flow you’ll see over the investment term.
Think about your initial investment and the appreciation it will earn over the years that you hold it. And, on top of that you will have monthly cash flow.
Determine how you are going to exit the investment.
You should know your audience – who the potential buyer of the property is going to be years from now. Know who your buyer is on the way out.
Think in these terms when you think of property improvements also. If you add a gate, dog run, covered parking, etc. who will want to rent at the property and who will want those renters?
That helps you find your future buyer.
Know Your Market
These points are general categories of information to be aware of. For example, “Know Your Market” has much more information and detail to know to be an effective and informed investor. For example:
- Rents. You need to know what rents are in the neighborhood. Are they seasonal or year-round?
- Jobs. What is the employment rate, industry and companies that fuel the rent situation? What have the trends been in the area?
- Occupancy. What is the physical occupancy of the property? What is the financial and economic occupancy? Again, look at the trends and year over year.
- Tenants. Who are the tenants, their history and the type that rent there? Has it always been that way? Are things changing?
- Location. Where is it? What is it near? Is it a transition neighborhood? A few blocks can change things dramatically. Is there any construction planned? What type?
- Owner. Know the other owners in the market along with the current owner of the property.
- Sellers. Know who the sellers are in the market and who you are competing with.
- Market Expenses. How much are utilities? Does a one, two or three-unit work better in the market? What is the unit price? Will parking, lighting push rent up or be seen as a detriment?
These are just a few of the points to consider, and just a few of what I go through when sourcing, researching and deciding on real estate investment deals for Cardone Capital investments.
Be smart. Invest in learning everything you can about your investment opportunity. Invest in a sure thing.
GC, Cardone Capital.
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