Money Rules – 5 great money rules for successful real estate investing

Successful real estate investors understand how to analyze a deal, take advantage of an opportunity, or avoid bad risks. How do they do this in such a consistent and confident manner? Do they each have a builders’ “bible” in their back pocket? The answer lies in a simple set of “money rules” designed to meet their own specific goals, whether that’s becoming a real estate millionaire or enjoying a comfortable retirement. As a beginner investor, people would do well to follow these five simple rules:

  • Plan for a market crash – when buying real estate, plan for real estate prices to decrease, not increase. You should aim to buy at least 10% below what you think it is worth at the time. If prices drop 10%, it’s still fine.
  • Pay principal and interest – People who use “interest only” believe that real estate prices will always rise. Whatever happens to the principal (or principal) and interest, the tenant pays off the mortgage over time. That’s how you know it’s an investment – someone else is paying for it for you. With interest-only loans, no one pays off the loan; you rely solely on rising real estate prices to get ahead.
  • Dress comfortably – many investors will continue to leverage up to 80% or higher of total debt. If their real estate value does increase, they will increase their borrowings to about 80%. Unfortunately, if there is ever a 10-20% market correction in the next 20-30 years, it could wipe them out financially. Banks would see them as high-risk and too financially exposed, and could possibly foreclose on all the loans, forcing investors to sell at even more discounted prices. It is much more difficult to sell real estate quickly in a falling market because many investors are also trying to do the same. Consider increasing the speed by around 70% for more flexibility and guarantees.
  • Set and review rules – be nimble – Set 3 to 4 rules that you will stick to, but which you will review every quarter. These can be the countries to invest in (eg stable regimes), what type of property and also the desired yield. Don’t always assume the market is rising, but also build 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 with your investments and treat them like a business. 95% of your success will depend on your inner beliefs and your inner psychology.
  • If you are new to real estate investing, think twice. Are you doing it just because it’s popular and all your friends are doing it? Take a long-term approach, get good advice, use a mentor if necessary, and continue to develop your thinking and psychology. You can succeed in any real estate market – if you know what you’re doing. Whether prices are stable, rising or falling, you can always find success with the right approach. And remember, a declining market opportunity is outweighed by a stable or rising market, and that’s when professional investors can make the most money.

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