Real Estate

Money Rules: 5 Great Money Rules For Successful Real Estate Investing

Successful real estate investors know how to analyze a deal, sixteen an opportunity or stay away from bad risks. How do they do this in such a consistent and secure way? Is there a “bible” of real estate developers that everyone has in their back pocket? The answer lies in a simple set of ‘money rules’ developed to achieve your own particular goals, whether that be becoming a property millionaire or living a comfortable retirement. As an aspiring investor, people would do well to follow these five simple rules:

  • Plan for a falling market – when purchasing a property plan on property prices going down, not up. You should try to buy at least 10% below what you think its value is at the time. If prices drop 10%, that’s still okay.
  • Settlement of principal and interest – People who use ‘interest only’ believe that property prices will always go up. With principal (or principal) and interest loans, no matter what, the tenant ends up paying off the mortgages on the properties over time. That’s how he knows it’s an investment: someone else is paying for you. With interest-only loans, no one is paying back the loans; it relies solely on increases in property prices to get by.
  • computer comfortably – many investors will continue to leverage 80% or more of their total debt. When they get property price increases, they will increase their loans up to around the 80% limit. Unfortunately, if there were ever to be a 10-20% market correction anytime in the next 20-30 years, this could wipe them out financially. Banks would see them as high risk and too financially exposed and could possibly call in all the loans, forcing investors to sell at even lower prices. It is much more difficult to sell property quickly in a falling market, as many investors are also trying to do the same. Consider a leverage of around 70% to build in more flexibility and safeguards.
  • Set and review rules: stay agile – Establish 3-4 rules that you will abide by but review each quarter. These could be which countries to invest in (stable regimes for example), what type of property and the yield you need. Don’t always assume an appreciating market, but also create rules for a static or declining market. There are many opportunities for real estate investors in a declining market.
  • believe in your success – Be professional about your investment and treat it like a business. 95% of your success will come down to your inner beliefs and your inner psychology.
  • If you are just starting to invest in real estate, think carefully. Do you just do it because it seems the most popular and all your friends do it? Take a long-term approach, get good advice, use a mentor if necessary, and keep developing your own mindset and psychology. You can do well in any real estate market, if you know what you’re doing. Whether prices are stable, rising or falling, you can always get it right with the right approach. And remember, the declining market outweighs the steady or rising market, and this is when professional investors can make the most money.

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