I do not mean to brag at all, but I have had a good share of success investing in properties and that’s why I want to share these 5 principles I use every time to win big when I invest in real estate.
These 5 principles can make the difference for you when investing properties. It will help you buy like a pro and accelerate your investment journey faster than you can imagine.
Cash flow. I always buy for cash flow. Every time I buy real estate I keep it in mind that it must give me cash flow because if I put my money in the bank I will get interest. Likewise, if I put my money in stocks and shares, I will get dividends. So when I invest in properties I also want returns and that is cash flow. Property to me is a cash machine; it gives me income every day, every month and every year. When you learn to invest wisely, your returns will be good cash flow from your portfolio every time.
Add value. I like to buy properties that no one wants to touch, properties that smell. I call them the smelling ones – the kind of properties that I can put my own signature on. I don’t look for perfect properties that have a good kitchen, good toilet or the like; I want to put my own signature on the property. So, I look for properties that are run down, not with structural problems but property that can be refurbished or renovated, the ones that need a new kitchen, toilet or bath. You can even put a new painting, new floor, ceilings or double glazing. These are the things that will make it look wow.
When you do this, you are adding value to that property and because of that, you will be able to buy this property at around bottom price. Also when you look into those properties, the amenities that need to be fixed are what you will use to negotiate with the vendor. Often times, when you get a property that is not good and you add your own value to it; you might have increased the value of that property by £25,000 to £30,000.
Leverage; I always look for ways to buy properties without any of my money. Yes – you heard me right. I use different strategies to raise funds for my investments. If I want to buy any property, I look for a way to make sure I use little or none of my money. How do I do this? I could refinance my existing property, I could borrow from friends and family, I could borrow from the bank or I could do joint ventures. There are so many strategies that you can use to be your own bank, but leverage is key.
Did you know that property is the only asset class that the bank will lend you almost 100% for if it’s commercial? That’s the truth. Another testament that leverage is key, it is the ability to print your own cheque and be your own bank, and importantly one of the things that could make you a winner especially if you know how to raise funds not just for properties but for any other business. Whoever knows how to turn this tap will be a winner because cash is king.
Appreciation; I invest in property for appreciation. When I say that, I mean two types of appreciation that you must look out for. First, you need to understand that a property is an asset that you will enjoy its yields after a long time, around 8 – 20 years. In fact, most properties double between 8 and 12 years. This means, when you are able to hold properties for a long time, you will enjoy the profits of a certain income in the future.
Therefore, you are able to enjoy both capital appreciation and rental appreciation. This is very important to hold on to, property investing is a journey. Always invest for a long journey, If you are able to hold properties for a long time you will create wealth that you can be passed on to your children and the generation after.
Discount; is a vital one for me. This is the centerpiece of my principles. I will not buy real estate or property if there is no discount in it. I always buy below market value because you make a profit from day 1 when you buy not when you sell.
If I’m able to buy below market price at a discounted value of 10% or 15%, and if that’s just £20,000, it does not matter.
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