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Seven Deadly Sins of Small Time Investing

We’ve all heard rumors & discussion about the inherent issues of owning income producing properties. These are the Seven Deadly Sins of Small Time Investing that that you will need to watch out for.

1/Buying outside the Bell Curve. The Bell curve is in the middle it’s what most people in a city can afford.

If the middle of the market in your city is about $300,000. don’t buy a million dollar property or you will be come a don’t wanter owner very fast.. as soon as the big mortgage payments kick in.

People don’t want to live in crime ridden areas but most people cannot afford to buy in the prime areas.

Buy the type of house most people can afford. Usually a 3 bedroom one or two bath house.

Three bedroom, 1 or 2 bath. Just remember that… geared to the average wage earner. This is always saleable.

2/ Buy based on emotion. Many folks buy on emotion. They forget to analyze the numbers. Or folk get caught up in how it looks or smells. Don’t worry about these issues.

Don’t get caught up in a house having to meet your personal standards. Alternatively, you may be Tempted to buy something because it is your dream home, but the numbers don’t work.

Forget it, the numbers are what count. And you can quickly de-stinkify a stinker.

3/ Forgetting to do your Numbers or Cash Flow Analysis. The numbers must work. Either you must be buying 25-40% below market or there has to be strong cash flow.

In other words you must have a good ROI meaning Return on Investment.

If the rents don’t make sense and don’t cover the expenses and make a profit. Don’t continue. Walk Away Quick.

4/ Funding it the wrong way. Most people think they have to come in with a very large foundation.

Donald Trump didn’t get where he is by using his own money he used everyone else’s. Don’t overuse your cash. Go with a low down and make sure the cash flow works.

5/ Speculating on an increase- Forget it if it happens it’s fine. You want to walk into equity not hoping that somehow equity will grow Or have good cash flow when you close the transaction. Not looking at a monthly loss. Never buy negative cash flow.

Okay so What  I am saying is, in Real Estate you make your money on the Purchase. In other words you make your money during the negotiation.

After that it is gravy But don’t be saying to yourself  “If  I hold it 5 years it will go up and be worth this or that” Maybe it will and Maybe it won’t.. You don’t care All you care about is

A/ either the price is right or

B/ The income is right.

When I buy an investment property I don’t care if the value goes up or down. I care about how much money I put in my pocket each month. That’s the whole point of becoming financially Independent.

6/Thinking that one house going awry means all houses go awry. People get upset if a renter leaves early or defaults, don’t worry about it. One tenant issue does not a business make or break.

Ultimately things are appreciating long term.

Save last month’s rents so you have a buffer.

Try to Have an equivalent of 3 months rent in an account for each property. This is ideal. However for sure have at least one months rent. For an emergency situation.

7/ Trying to do too big of a deal on the first property.

Don’t try to go too big go duplex or triplex not a strip mall or you will scare yourself and things will go off the tracks.

Bonus Sins – Here’s A Few Extra

8/Harming another in a transaction. Don’t try to take unfair advantage of the Seller.

Once you are a landlord stay in your integrity. Become a good landlord not a bad one. It is a step by step learning process.

9/Trying to invest in a vacuum without a team

Basic Core of Your Real Estate Investing Team

Attorney

Mortgage broker

Personal banker

Realtor

Home inspector

They all support you and assist you in your Venture. Be happy to pay them their fees.

Don’t be afraid to negotiate fees if you are buying or working with them regularly and can promise a specific level of business. Say five or ten million a year. ( to be negotiated)

10/ No substitute for knowledge. There are lots of books and courses, on the subject of real estate investing .

If you would like full fledge Coaching on the matter of real estate investing you can reach the Toronto’s Home Investor Coach Aeriol Nicols at (647)886-1550

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