Right at this moment in time—perhaps the last time for a few years—the real estate market is big. And that means any money that you are able to put into it will get big as well.
The stock market is down. Crypto has fallen apart. There are already people doomsaying the next Great Recession. But until the housing bubble bursts, it isn’t real. The country is a cartoon coyote chasing the road runner. We have run off the cliff. But we haven’t fallen yet.
So, if you are going to get money out of the real estate bubble, you have to strike fast and hard. Here are the 10 things to keep in mind in order to invest in residential real estate effectively.
Never Make a Down Payment Greater Than 10%
This is a rule of real estate that comes from further back than any bubble, or indeed the United States itself. Even in the days of Ancient Rome people were trading property as commodities.
And even back then, people knew that if you overpaid for a property you would end up regretting it when the whole industry collapsed a week later. If you pay too much up front, you are losing tons of liquidity that is basically going away for nothing.
Have Clear Debts
No matter what you are buying, you can get a better price for it if you appear trustworthy. While credit score does not matter in most real estate deals, it matters a lot in residential real estate.
The reason is that even though families are not buying homes anymore, the trade of real estate still operates off of the rules laid out for family home buyers. And those rules usually weight credit score as highly material. Less debts mean a much better credit score.
But Don’t Have no Debts
This is the unintuitive part of credit score. “Don’t have no debts” means “have debts”. So, why seek out having debts? Simple: Because paid off debts make you look more trustworthy than not taking on any debts at all. You see, people with no cashflow don’t take on debts.
If you take on debts and keep them in good standing, then your seller knows you have cashflow.
And Sometimes, Don’t Worry About Credit Score
This is really only a rule if you are buying residential real estate in cash or are otherwise getting some sort of unusual deal. Basically, there are a great many kinds of deal you can be making that result in credit score being immaterial. You will know when you are making a deal like this.
People like to pretend at knowing the “art of the deal”. Well, this is the art: Make the deal a personal transaction rather than a proper one. If you can do that, credit score matters less.
Invest Low
In any other marketplace in the world, “buy low, sell high” is not only the most obvious way of making money, but also basically the only way of making money. Real estate, particularly residential real estate, makes it a bit harder. Some of the best properties are priced high.
But you do not always need the best properties. Sometimes, you just need a small investment to leverage into a loan. Or a cheap house to flip into something better.
Reinvest High
While we are the subject of house flipping, that is a market worth exploring. The reason why is that it is harder for a bursting real estate bubble to harm a house flipping business. Since most of your value comes from outside real estate, you just have to find a house that can be flipped.
Don’t be Afraid of Empty Lots
Empty lots in a residential area are a secret gold mine. They are low value, high risk, and take money to develop. But they always pay off in the long run if you know how to exploit them.
This is because an empty lot in a residential area can be the nicest house on the block, or the cheapest. Both are desirable. It just takes knowledge to get them there.
Know Your Construction Companies
Knowing your local construction companies is one such avenue of knowledge to explore. What you need to know is what they do, how much it costs, and when they can get it done.
If you know this, then you can buy any property, make a plan to turn it into something profitable, and then get a loan from a bank to renovate it. But making that plan requires you to be intimately familiar with how everything is done. You are not getting a loan without demonstrating that. Luckily, tons of guides on that are published on Teifke Real Estate.
Don’t Stop Looking Until You Have Found Your Deal
This can mean quite a few things. It can mean you look through house after house to find the right one. But it can also mean researching more and more until you have the evidence you need to justify buying lower or selling higher. What we are saying is: Don’t quit till you’re there.
Keep a Cool Head
Real estate investment is many people’s livelihood. It is a career path. But what many people do not tell you is that it is one of the silliest ways of making money out there.
Most people in real estate are living and dying off of predatory loans from banks that will take the house and kids if a single payment is missed. In short, they are stressed. And you might be in this same position. But whether it’s while you are looking for property or trying to close a deal, you have to remember to not lose your cool. Don’t get mad or impatient, or it’s all over.
Conclusion
The real estate market is on the edge of a knife. But while that is a scary place to be, it is also where many millionaires are made. So, be ready to take the risk of your life. It might pay off.
