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The 7 golden rules of investing in real estate

Updated on July 17, 2014

The 7 golden rules of investing in real estate:

In the last few years, I've been buying, renovating and reselling real estate. It was not always easy and I became well aware that there were some rules which, for better or worse, are always true in all markets. I purchased quite a lot, and these rules work.

I am not going to talk about flipping homes and reselling, but how to get the most out of a deal when purchasing real estate for your projects.

Following these rules can be a benefit if you're looking for huge profit, ignoring them can be risky.

1. Make money when you buy, not when you sell.

If you buy at a decent price, you will avoid making any kind of mistake. Buy property anywhere at below market will keep you in safe mood when you resell it for profit, everything becomes easier.

If you buy at market value "the market sale" it will cause the opposite affect.

2. Always Buy from a motivated seller.

Who is a motivated seller? is it one who wants to sell? A motivated seller are those who no longer want to keep their property for one reason or another, so you aren't wasting time with someone who clearly just wants to sell and is not looking for a big pay day . A seller who simply has no time and lacks some funds will definitely be motivated to sell.

3. Be in love with the deal, not the estate.

It often happens that you see a property you like, maybe even a lot, and at that moment you're unable to be objective. But remember that it is never the estate which will make you money, bricks do not bank. It is the deal that the estate can bring that is going to make money. Always stay focused on the deal and never on the estate.

4. Learn to negotiate.

If you want to really learn to negotiate, there are lots of workshops that can teach you . However, a simple rule is this: never be the first to mention a price. It is the number one rule that works in all sales opportunities, not only with real estate. The first one that mentions a price will eventually lose. The real estate can be worth a very different price (up or down depending on whether you are selling or buying) and is basically determined by your ability to negotiate.

5.Try to buy with little or no money down.

The real estate business is a business that as to do with debt. Investing in real estate with your own money negates the advantages of this type of investment. So always try to buy for less money, or, better yet, no money down.

Offer low deposits (start with a few hundred dollars) and make a bid to purchase that you would consider embarrassing (a minimum of 30% below market value if not 50%). Remember rule # 1 of the investment property.

6. In real estate, cash flow before capital .

The cash flow is the healthy part of any business. You can also have a profitable business but if your cash flow is negative, you can easily crumble to pieces.

With real estate, gaining cash flow is achievable through renting, it's like "having income". However, in many places it is very difficult to have a positive cashflow from property rentals if you're paying a mortgage. You must instead create capital with sale and then use that capital – along with leverage – for larger operations that will aim to generate cashflow.

7. The Real estate deal of a lifetime do happen every week if you're dedicated to your search.

Real estate deals always exist in every period of the market and in every other market as well. If anything, the problem is to find them. But to find them you have to start believing that there are (because there are, I can assure you). If you start believing, you can actually find homes up to 30% discount and with financing options to your advantage. This sort of opportunity would set you up for an easy and profitable sale! Each week there will be at least one opportunity that comes along for a real estate deal. And if one doesn't fully convince you, move to the next property.

Seven rules that are really the backbone of investing in real estate. And if you decide to become a real estate investor, whether it's for buying, flipping and selling, you will be a natural. And as you can see, these are simple straight to the point rules based on what you could call "business intelligence."

.Buy low

.Be good at negotiating

.Don't fall in love with the estate but only of the wealth that can come out of the Deal .

Financial freedom is a goal that's worth achieving.

And everybody deserves financial stability.

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    • Johan Smulders profile image

      Johan Smulders 2 years ago from East London, South Africa

      Good advice!

    • Jangaplanet profile image

      A Ercoli 5 years ago

      Hi loyddonald, thank you. You can make money if you get involved in real estate deals. There are also a lot of mistakes that can be made along the way. The best way of avoiding costly money mistakes is to understand a few rules, which can give you an advantage! Thanks for stopping by, I appreciate it.

    • loyddonald profile image

      loyddonald 5 years ago

      These are indeed easy to understand and precise, great advices!

    • dbialecki profile image

      dbialecki 5 years ago

      These are good general rules of thumb. It would also be wise to do a thorough due diligence check and get a great real estate agent who knows the local market!

    • joshuarei profile image

      joshuarei 5 years ago from Indianapolis, IN

      These are good investing rules to live by.

    • profile image

      Danny 6 years ago

      I currently own 3 income rental properties and am attached to them which makes it hard to sell. I agree with you and am absolutely 100 percent on the rental side of the equation. While my homes still have mortgages on them I can earn a good amount a month per property in cash flow. Once the mortgages are repaid, (hopefully soon)! I can probably net a good portion. per month in cash flow. I really appreciate the information and the negotiating side of it. Thanks

    • Ann810 profile image

      Ann810 6 years ago from Sunny Cali

      Thank you Jangaplanet, good advice. I have to work on my negotiating skills. :)

    • Ingenira profile image

      Ingenira 6 years ago

      Helpful advice. Glad that I read this before venturing into property investment.

    • rallyre profile image

      rallyre 6 years ago from San Diego, California

      Great advice in reference to learning how to negotiate!

    • duffsmom profile image

      P. Thorpe Christiansen 6 years ago from Pacific Northwest, USA

      Jangaplanet--excellent sound advice. I enjoyed reading it.

    • Jangaplanet profile image

      A Ercoli 6 years ago

      welcome PR Morgan.

    • PR Morgan profile image

      PR Morgan 6 years ago from Sarasota Florida

      Good advice! Thanks for sharing your knowledge!