Rules for Success in Real Estate Investment

By Norman Linton, President of Mortgage-investments.com

I have bought and profitably sold some 100 properties over the last 15 years, including a 50,000 sq.ft. office building and an 86,000 sq.ft. shopping center. (Made over $1m. cash in the bank on the last one).

This is not to impress anyone but so that you know that I DO know what I’m talking about and have “walked the walk”.

Rule one: Realize that real estate is a local market, often a really local market. So buy properties you can drive to within the hour. This makes it much easier to: know values, meet potential buyers and sellers, tenants, contractors etc. You can increase this to two hours if the deal is for over $1 million.

Rule two: As a rule of thumb, if you intend to flip a property you should pay 30% below fair market value.

Let me be clear here, if you buy a house for $70,000 and it will be worth $100,000 after you have spent $30,000 in repairs, you didn’t get a bargain. You paid fair market value.

Online Calculator to more accurately analyze the deal (also available as a FREE Microsoft ®Excel Spreadsheet Download).

Rule three: NEVER try to pyramid your holdings by borrowing more money against a property you already own. Buy a property, fix it, flip it and use that money against your next deal.

Rule four: Don’t quit your day job until you are earning as much from real estate part time as you are from your day job full time.

Rule five: NEVER lie to get a loan. Don’t fudge appraisals or your income. If the deal is as good as you say it is, you will be able to find a hard money lender on our web site:

A hard money lender will constantly be looking at deals where it is obvious that the comps have been carefully selected to show a higher value. Why on earth would you do this? Even if you get a loan for more than you should do, you WON’T MAKE MONEY ON THE DEAL. Because you will have PAID TOO MUCH.

Rule six: Always act with integrity. Do what you say you will do when you say you will do it.

On the other hand, there have been borrowers that have lied, bounced checks and they have ended up being foreclosed. They will never do business again, no matter how good the deal.

Rule seven: Don’t confuse an upwardly moving market with you being smart. If all prices in the area go up 20% that doesn’t make you a real estate genius when you sell, just lucky.

Rule eight: Keep some properties as long term rentals. Say one in three or one in four. That is how you build up true wealth.

Just buying, fixing and flipping is a JOB just like your day job. Not an investment.

If you can buy and keep just one property a year, you will own 10 properties in 10 years. Enough to retire on.