If your tolerance to risk is not aligned with your selected strategy, you will either have many sleepless nights, or feel frustrated because you feel you are not maximising opportunities and could be buying more property.
However, an investor is not guaranteed to get a good return by investing in real estate. Let’s look at the 2008 financial crisis. Some unfortunate investors purchased property just before the crisis hit. They probably observed the housing market and believed that prices would continue to increase. Unfortunately, most of them lost out.
Over the years I’ve had personal experience with mentoring and I’ll draw on that experience to illustrate several approaches to asking someone to be a mentor to you.
One lesson being rich teaches people is that money talks. Savvy property investors know you don’t have to wait until a For Sale sign goes up in order to purchase. If an interested party takes the current owner by surprise, it is often possible to get a good price on a piece of property that isn’t even up for sale. And there aren’t any competitors to drive up the price.
I would never encourage any investor to jump into such a project. To turn such an investment around requires a building with sound potential for value, really deep pockets and a very good understanding of the renovation game and construction contractors. Poor Jane thought she could do this on her own with her boyfriend, who might have good looks but has no previous construction experience. Occasionally, they would hire a tradesman to do the work they could not, but this is no plan. Everything backfired, even their own relationship was destroyed in the end, as a result of all the unmet expectations, pressure and constant arguing on what should be done. And let’s be realistic, their expectations were unreal from the outset.
Always, always remember the Golden Rule: it’s all about the due diligence. Why risk your hard-earned money? If you follow The Zen Investor methodology, you’ll see the ease of entry when property investing. We stay far, far away from situations like Jane’s, being careful to choose the few credible projects that survive our high standards of scrutiny and choice during the due diligence process.
Know your numbers. Before you make your first real estate investment, you must do your homework first. For instance, if you plan on rehabbing a property, find out the house’s after repair value. Then calculate all your projected expenses and subtract the figure from the ARV to get your expected income. If the income is to your liking, then you should start the project immediately.