I would venture to say that most investors hold misconceptions and make mistakes when they're starting out. I know that I did! Many of us learn through this process. You shouldn't beat yourself up if you overpay on your first rental or make extraneous renovations. What's important is that you learn from those mistakes, and get your strategy on the right path.
Today I'm sharing five things I wish I had done correctly the first time around! Follow these five tips and you'll avoid a lot of headaches:
- Fall in love with ROI. Return on investment is the number one metric that will make you successful as a real estate investor! It doesn’t matter what the house looks like. All rental homes are simply four walls and a roof. Effective investors fall in love with ROI, not a cute little bungalow with beautiful landscaping in a charming neighborhood.
- Purchase properties in the right rental markets. New investors might begin searching for properties in their city on Zillow, or drive around their neighborhood looking for local homes for sale. But successful investors know that the most profitable, worthwhile investments are most likely not located in their backyard.
- Hire a property manager. Hiring a property management team makes real estate investing simple and passive! A skilled property management team is an indispensable part of your success, and will make your business scalable.
- Overestimate expenses. In my ROI formula, I remove 40% for vacancies, repairs, and expenses. Expenses are inevitable in any business, and real estate investing is no exception. Be conservative with your numbers, and ensure you can cover any expenses that should arise.
- Realize cash flow is the end goal, not the first step. Understand that gaining cash flow is a process, and there are a couple phases to go through before you reach your ultimate goal.