No matter where you live, where you invest, or where you are in your investing business, there are real estate investing basics that we should all follow to be successful.

Investing in real estate rental properties is basically the same throughout the entire world. It doesn’t matter the country as long as you follow these real estate investing basics.

Real Estate Investing Basics

 

1. Always make a positive monthly return of cash flow each month

When you are investing in real estate rental properties, the investing basics would be to make money every single month. If you buy an investment that doesn’t make you money every single month, and you are waiting until you’re 65 years old to access the money, you will be stuck working until you retire.

By investing in rental properties, you have cash flow coming in every single month. I tell all my students that they need to shoot for $250 or more in passive income in order to have a successful real estate investing basics business.

The investing basics math for this would be: Income – Expenses = Profit

Your income is the rent that your tenant pays you for the privilege of living inside the home that you own. All of your expenses would be things like your mortgage payment, taxes, insurance, even property management fees.

You total all of the expenses up and that is what you deducted from the rent received as income. If you have a positive amount than that is how much money you make each month. If you have a negative amount than that is how much you lose each month.

Income – Expenses = Profit

Monthly Rent: $1,200
Monthly Expenses: $850
Passive Income: $350

The rental property calculator:
https://www.masterpassiveincome.com/resources/investment-property-calculators/investment-property-calculator/

2. Buy lower than market value

You make your money when you buy the property. You realize your money when you sell the property.

A key real estate investing basics is to buy the property for less than it is worth. In doing that you are immediately capturing equity and putting that in your pocket basically.

Imagine if you bought a property for $100,000 but it was worth $125,000. Then you would have immediately captured $25,000 in equity that you could potentially used to buy more rental properties.

Think of it like this, if you bought the newest iPhone for $500, but then you can sell it on eBay for $1,000, then you would make $500 in the transaction.

The principles of same when you buy an investment property. If you buy it for $100,000 but consult for $120,000 you have made $20,000.

When you are investing in real estate, you want to make sure that you buy the property for much less than it’s worth. I personally only by properties where I make money from day one in the property.

Buy Low / Sell High


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3. Buy properties that you can fix up and force up appreciation

Buy properties that you can put money into to fix it up then you will have an increase in property value because of the new updates.

Forcing the appreciation of the property to go up is something that all investors must plan on doing. If you buy the best property that does not need any work, then you will not be able to make any more money on the property.

If you thought a property for $100,000 and invested another $5000 into the property painting the walls, replacing the carpet, fixing the broken lights, and other small things to the property, then you increase the value of the property.

Now a property that was worth $100,000 could be worth $125,000 with only $5000 put into increase the value of the property.

So for $5000 you make a net profit of $20,000 in equity.

Pro Tip: Use Delayed Financing to pull 70% of all your money out of the property.

 

4. Make sure the expenses are lower than the rental income

Income must be more than your expenses with real estate investing basics.

If your expenses are higher than your income, then you are spending your own money to keep the property going. That is not how you make money in this business.

Before you buy the property, you need to make sure that you have all the expenses accounted for and that they are lower than your expected income.

Many people go into a property thinking they have accounted for all expenses but usually they miss some.

Items like:

  • insurance
  • taxes
  • HOA fees
  • property manager fees
  • rental inspection fees
  • maintenance
  • vacancy factor
  • and many others

Pro Tip: Always go back and analyze your expenses to see if you can lower them.

Increase your rental income by: Increasing rents 10%, Fix up the property more to get more rent, etc.

 

5. Make sure there is demand for your property

Everyone needs a place to live. Whether it is in your property making you money every single month or someone else’s, there will always be renters that will want to rent your property.

You probably have heard it said “location, location, location” but that is only true if you are buying a property you want to live in. If you invest out-of-state, there are many people who live in the area you want to invest in.

Just because you may not want to live there doesn’t mean that somebody else wouldn’t. I invest in many areas of the country where I would not invest.

I personally do not like humidity and my properties in Houston Texas what not fit me very well. But other people are just fine with the humidity and they are just trying to live in my property.

You do want to make sure that it is in an area that people do want to live though. Talk to your property managers, realtors, and others to figure out if the area is a good place to own rental properties or not.

Inspect the State, City, Community, Neighborhood to ensure there is demand for your properties.

Pro Tip: Look at the movement of crime throughout the area. Crime moves locations so see the trend and the path it is going. Make sure you are not in the path of future crime.

 

6. Only invest where people will rent your property

Very similar to having a demand for the property, if the area is not a good area, people may not want to rent your property.

Considering crime of an area would be very beneficial to make sure that you find properties of people will most likely stay in a property longer.

Schools quality is also another factor for many people wanting to rent. If the schools in the area are not good, less people will want to rent your property.

It is basic supply and demand. If there is more demand for your property and others like it, then the likelihood of you getting it rented for a decent rent amount is very good. When there are many more properties that are renter than the supply is higher than the demand and it will be harder to rent the property.

If the demand is low for your rental, you will get low rents for it because of high supply and low demand.

 

7. Buy good investments not good properties

The reason why you want to buy a good investment in rather than a good property is that you are not going to actually be living there. Good investments and did properties are different things.

  • A good in investment will make you monthly cash flow from the rents.
  • A good property is, the nicest on the block, needs no work, is worth more than others in the area, etc.

Good investments will make you money. Good properties are the ones you want to live in, not rent. You will be making money every month because the income is greater than the expenses.

A good investment would be a three bedroom, two bathroom, two-car garage, 1200 ft. in an area that people want to live. By finding properties like this, you will have a high amount of people wanting to rent the property. Even after you want to sell the property, there will be many buyers who would want that property for themselves.

 

 

8. Place good tenants and run background checks

There would be no reason to own a property if you lost money.

Finding bad tenants will lose you money every single month and every single year. Knowing how to properly screen tenants, finding which potential tenant would be the best want to run your property, and weeding out all the bad ones are things that landlords must do. It is a basic real estate investing basics that all investors must know.

When you use Cozy.co as I do, your tenant will automatically be sent to go through a background check and they will pay for it.

 

9. Make the property rent ready, not the best house on the street

Rent ready is different than fixing up the property for you to live in yourself. You want to make the property comparable if not just a little bit better than the other homes in the area.

You need to remember that you can only rent the home for a certain amount that the market in the area can bear. If you put a lot of money into a property to fix it up with granite countertops, hardwood floors, beautiful new kitchen, and other high dollar upgrades, you will be spending a lot of money but not getting a lot in return.

Imagine putting a granite countertop into a property where most homes in the area do not have granite countertops. You will probably spend around $3000 to put a granite countertop in the kitchen but the rent may only increase by $50.

That would take 60 months or five years for you to pay off the granite countertops with the extra $50 a month. More than likely that $3000 to be better used buying another property instead of making this property over the upgraded many others in the area.

You want your investment to bring back as much money as possible into your pocket with the least amount of money out of your pocket.

 

10. Buy properties that make you $250 a month or more in passive income.

I tell all of my coaching students that they should by properties that make them $250 or more each month in passive income. As an investor, we do not invest in appreciation rather we invest in passive income in monthly cash flow.

As a real estate investing basics, making money every single month is the main reason for our business.

Many investors by properties that make less than that each month. Some are okay with $100, and others are okay with $200. Some investors or even okay with losing money every single month.

That is absolutely horrible idea. Never buy a property where you are losing money every single month. Even if you are a doctor any to Park your money somewhere, always be making money overseas.

The reason why you want to shoot for $250 or more is because $250 times 12 months is $3000. If you have a furnace that goes out and you need to spend $1500 to repair it, then you still have $1500 in profit that goes into your pocket.

Imagine if you had a property where you are only making hundred dollars a month, then you would only be making $1200 a year. With that same furnace going out, you would be paying out of your pocket $300 extra for the furnace not to mention all the other maintenance and repair costs.

Always my properties and make you at least $250 or more each month.

If you don’t make $250 a month in passive income, one large issue will cost you your entire years worth of profit.

Make sure you make enough money each month to turn a profit every year.

 

Real Estate Investing Basics Podcast Part 2

11. Be proactive with your tenants

The real estate investing basics of being proactive with your tenants is a must for all landlords who want to keep their properties well taken care of. A good landlord will see things coming in advance and be ready to take care of problems before they happen.

Pro Tip: Have your tenants tell you of problems before they become problems.

By having your tenants tell you before hand the problems like a leaky roof or some sort of other issue like pests in the house, you are able to get to the problem and fix it before the problem gets even worse.

The problem of a leaky roof will cause loads of damage in the ceiling repairs, dry rot, and many other issues.

You want to have as open of a communication channel as possible with your tent. Not that you are trying to buy them but you want to make sure that they should contact you immediately once they find an issue. The longer an issue goes, the more it will cost you again.

You want to be proactive rather than reactive in this business. When you are reactive, your options are very limited and will cost you a lot of money.

 

12. Take care of good tenants

Nobody wants to live in a home that is falling a part. Landlords are in the business of helping others have good housing.

Keep the property in good condition and never let work that needs to be done go without being done. When you have a good tenant, one who has paid rent for 1 or more years, take care of them. Go a little bit extra for them to help them out.

The cost of turning over a property is much more expensive than being a little forgiving on a tenant. Big thing to remember though is to not let them take advantage of you.

Turning over a property can cost you $2000 or more if you go without a tenant for long.

Save yourself money and take care of your tenants.

Even if you should raise rents because the area is $100 more than you are currently renting, think twice about how much you are going to raise it.

If you have a good tenant who has been in the home for 5 years, you may want to not raise the rent too much because you want to keep a good tenant in your property.


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13. Run your business like a business

If you did not pay the mortgage on a property, your banker would take the property from you. Same should happen with you and your tenants. If they do not pay, they need to be evicted.

When running your business like a business, put in business processes.

I personally lost tens of thousands of dollars running the business the wrong way. And that would be not evicting people when I should, not charging the right amount of rent, or even buying the property that did not make me enough money each month.

There are certain business rules that you need to put into your business and have been established with your property manager so your business runs smoothly.

Your business will be different than mine but there are certain real estate investing basics that you would need to have in your business. Just like how your bank will foreclose on you if you do not make your mortgage payment, you need to you picked tenants who do not make the rent payments.

Even if you have a horrible sob story to tell the bank, how your car got impounded, how your wife left you, or all the other bad things in common your life, the bank will not stop the foreclosure.

In this business you will get many people who will tell you one thing that is going on their life that may be true or may not be true. Either way, you need to make sure you have business rules put in place to protect you from people wanting to take advantage of you.

Here is the biggest key for running your business like a business.

Rent is due on the 1st. Late after the 3rd (with late fee). 3-day notice on the 4th. Eviction starts on the 10th.

 

14. Always be on the lookout for future deals

If you have one property, you are an investor. No matter if you have one or 100 properties, you need to consider yourself someone who is a real estate investor.

Investors are always on the lookout for future deals that will be good for their business. Even if you don’t have the money right now to buy a property, be on the lookout for the deals. Ideal may come up where it works out in your favor even if you do not have the money to buy it.

Also when you have deals you have more options coming your way. You may even be able to find a seller financing property where you have the seller be the bank and you take ownership of the property, rented out, and then pay the seller a monthly payment.

There are so many ways to acquire properties and so many ways to make money in this business that you need to always be open for another opportunity.

Investors are always looking for more properties, even if they are not in the market to buy one at the moment. They are also read for deals to come their way. Always have Wholesalers, Realtors, etc. looking for properties for you. You never know when a property will come that is a great deal.

 

15. Tell everyone you meet that you are an investor

When you tell everyone that you are an investor, deals and money come to you. As your reputation as a good investor gets around, people will want to work with you and even give you money.

When you ask most investors what they do for living, they will tell you that they work for a company and have a side business investing in real estate. That should not be true for you.

When you have one property you become an investor.

There is a saying, “fake it until you make it”.

This is a good song but you are no longer need to fake it if you have one property already. Even if you don’t have any properties, who you are is not defined by the job that you work.

Who you are is who you tell other people you are. If you believe yourself to be an investor with a side job, then that is what you should tell everybody.

Even if you only have one property or no properties, tell everybody you are a real estate investor with a side job. It is more of a state of mind that you are now an investor and you will not be defined by your job.

In doing this you will find many more deals will come your way with many more opportunities attached. You will even find that other investors will be attracted to you as well as people who have money would like to invest with you.

In this business, it’s not what you know but who you know. The more people you know that can help you in this business the better. Also the more people you know can allow you to help more people and make more money.

The real estate investing basics is to tell everyone that you are an investor first.

 

16. Have a property manager to run the daily business of the property

Real estate investing can be an automatic business. When you pay someone else to manage the properties for you, you have the freedom to never work a job again.

I personally use property managers for the majority of my properties. Property managers are like your quarterback in the business and will run your business for you.

When you have a good property manager, life is a breeze. They make sure that your properties are well taken care of and that you are making money every single month.

A good property manager will help you check out the properties to make sure they are the right ones to buy, tell you how much it would cost to fix up, rent out the property for you, and collect rent every single month.

Basically they are an extension of you taking care of your business.

 

17. Build a great team of professionals around you

A team is essential to a great business. Never go it alone. Never do everything yourself.

Each area of the country I invest, I always build a team of professionals around me to run my business. I even start entire new areas to invest in without ever even seeing the property, city, or state.

When you build a team of people you trust, they will run your business for you and free you up to do whatever it is you want.

  • Property Managers
  • Realtors
  • Wholesalers
  • Contractors
  • Handymen
  • Inspectors
  • Roofers,
  • Electricians
  • Etc.

 

18. Use Leverage to Buy More Properties

Your money can only go so far. If you had unlimited money, then you could buy as many properties as you want. This is when you use leverage to buy as many properties as you want.

Using O.P.M. (Other People’s Money) is the fastest way to grow your business.

Use banks, friends, family, hard money lenders, seller financing, etc. to buy more properties.

I have recycled my money many times in the process of building my rental property business.

After buying the first property, I would refinance it and take all the money out to buy the next property. Once I have the second property then I would refinance the second property, pull all the money out, and by the third property.

Going through the process over and over again has made my business very successful. It is not a hard thing to accomplish, it is just finding the means to get there through using other people’s money.

 

19. Grow Your Business

Never stop growing your business. Never get lazy and think “I am all set. I have enough properties and now can watch TV for the rest of my life.”

Always be growing.

To quote the movie Tommy Boy: “In business, you are either growing or you are dying. There ain’t no third direction.”

Many people think it’s hard to grow your business after you get the first one or two properties, but that is not the case. Real estate investing is like throwing a snowball down a mountain full of snow.

Initially the snowball is going very slow and a small but the further down the hill roles, the more snow it grabs in the bigger gets. The bigger the snowball gets the faster moves and the more snow it grabs onto itself. As he gets bigger and bigger, so does the speed at which he gets bigger.

This is the same thing when it comes to your passive income with rental properties. Each property is like another 10 feet down the mountain grabbing more snow. As long as you are saving your income to buy another property, you will have the money to buy the next property fairly quickly.

You can also use leverage meaning getting a mortgage, refinancing your properties, or barring money from relatives to build your business.

 

20. Get Coaching

This is a personal lesson I learned that I want to save you from.

I spent, or wasted, tens of thousands of dollars by not getting coaching on how to invest. Everything from loss of rents, evictions, inspections missed, etc. These are all things I would not have had to pay for if I had a coach helping me along the way.

If you are interested in real estate coaching, I can help you just like all of my other students. Find out more by going here: www.masterpassiveincome.com/coaching

 

Whether you are new to real estate investing basics or a seasoned pro, all of theses real estate investing basics are there to help you make money, quit your job, and live the dream life.


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Real Estate Investing Basics Help You Invest Anywhere In The World