Make Money When You Buy
March 9 2016 Posted by Guriqbal Chahal, MBA, PMP
Every intelligent real estate investor understands the basic principle of making money when you buy. It’s extremely important to learn and understand this concept for your business because it can mean the difference between succeeding and failing. Forget all the infomercials on television that try to sell you on simple ways to make it rich in real estate, because the fact is, investing in today’s market takes a savvy person to make great deals happen and these great deals are carefully crafted.
The principle of making money when you buy is an attitude when it comes to investing. In a nutshell, you want to purchase a property that will make you money now and in the future. How you buy the property now will determine how successful you are in the future when you decide to sell. Focusing on what the property should be for your business in the future instead of looking at its potential for today, can place your business on the quick path to bankruptcy. There are too many inexperienced investors that pay exactly what the market commands for a property just to get in the game and have a property under their belt. If the property is being used as a rental, they find out quickly that they’re losing money every month. Or, an investor seeks to flip a house for a profit and after he’s exploded his budget, realizes his potential profit has been flushed down the toilet.
You want to focus your attention on what the property will do for you right now. If it will be a rental, then look at how you can make it cash flow as soon as a tenant is placed. If you plan to flip the property, then pay attention to what the after repair value could be and then be conservative with your listing price when it’s ready to go on the market. Make sure you stay within your budget for repairs and make sure your mortgage loan’s interest won’t significantly hurt your budget for holding costs.
Make a great deal happen through negotiations and doing your homework on the property. Negotiate a purchase price that realistically works with your numbers and gives you profit at the end of the day. The markets will shift and change over time but chances are slim that they’ll shift in your favor if you bought at the wrong time or at the wrong price. Take your time and stay focused on how this deal will help you make money today and tomorrow. If you take this approach, then you’ll have many more successes than failures and you may stay in business for the long haul.