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If you are curious or interested about getting into real estate investing, here are some important principles you need to know and apply to become a successful real estate investor:
1. Educate Yourself
For years, world-renowned, personal development and motivational guru, Tony Robbins, always reminded people that knowledge is power when it is applied in real-life situations. This sage advice holds true today as knowledge is the new currency. Without acquiring and applying knowledge, you are doomed to follow other people’s advice without knowing if its right or wrong. Applying knowledge through education will take you from being a “good” investor into becoming a “great” investor. Get yourself educated by joining a real estate investment club in your local community, where you would gain the opportunity to learn from successful real estate investors, including their failures. I always continue my education in real estate investing through workshops offered by the Ottawa Real Estate Investors Organization and the Real Estate Investment Network.
2. Set Investment Goals
Setting clear and specific real estate investment goals becomes your roadmap and action plan towards having financial freedom and success you want to have. You are statistically far more likely to achieve financial independence by writing down specific and detailed goals than not doing anything at all.
Your goals can include the number of properties you need to acquire each year, the annual cash-flow they generate, the type of property, and the location of each property. You may also want to set parameters on the rates of return you want to earn on your real estate investment.
3. Invest for Positive Cash-Flow
It is important to buy an investment property that has positive cash-flow not only to cover your property’s expenses, but to have extra income available to either pay down your debt or set some money aside to pay your children’s university education. The higher your cash flow, the more financial freedom you have to improve you and your family’s quality of life. Your cash-on-cash return, or rate of return on your investment, is directly related to the before-tax cash-flow from an investment property.
4. Understand the Local Housing Market
Depending on where you live, always start looking at the best housing markets that align with your investment goals. Most investors start by analyzing properties with little to no regard of its location. This can be a big mistake if you don’t consider the investment in light of the market and neighbourhood it’s in.
The best approach is to first choose your city or town based on the health of its housing market and local economy (unemployment, job growth, population growth, etc.). From there, you would narrow things down to the best neighbourhoods (amenities, schools, crime, renter demand, etc.). Finally, you would look for the best deals within those neighbourhoods.
5. Use Professional Property Management
Never manage your own properties unless you run your own property management company or you have plenty of time on your hands. Property management is a thankless job that requires a solid understanding of tenant-landlord laws, good marketing skills, and strong people skills to deal with tenant complaints and excuses. Your time is valuable and should be spent on your family, your career, and looking for more investment properties you are interested in buying if you choose to do so.
I hope you and your family had a safe and enjoyable Canada Day holiday weekend despite the sweltering heat wave. Myself and Anita spent the Canada Day holiday with our friends in Canada’s original capital city of Kingston on Garden Island, one of the thousand islands in Kingston and the surrounding areas. We enjoyed great food, great company and the unique natural wildlife that Garden Island offered. This beautiful experience made us appreciate how fortunate and proud we are, as Canadians, to live in the greatest country in the world!
Enjoy reading the newsletter!
Michael B. Arthur
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