9 Timeless Tips From Experienced Real Estate Entrepreneurs

real estate investments

What works for them might not work for you. Sure. After all, your needs, requirements and investment goals vary and are unique.

However, there do exist some fundamentals that new investors can apply in their own case… something that you won’t necessarily find on real estate investor websites or portals.

Here are 9 timeless tips from experienced real estate entrepreneurs that will help you build a lasting, high-return portfolio:

1. Know The 80/20 Rule

The 80/20 rule is universally applicable. In our context, 20 percent of your properties will yield 80 percent of your returns. This means many things, like…

  • You can’t expect all your properties to make you riches.
  • You must be ready to accept small losses.
  • You must always have a bigger picture in mind, and NOT have a micro or short-term approach.
  • A handful of your properties would require the most of your attention.

There are many other ways how you can apply the 80/20 rule in real estate investment. Like, 20 percent of your properties would pack 80 percent of your risks; 20 percent of your lenders will provide you 80 percent of your mortgage financing.

Apply this Pareto principle wherever applicable.

2. Maintain The Right Debt Coverage Ratio (Dcr)

Debt Coverage Ratio is the ratio of the property’s net operating income (NOI) to its annual debt service. Aim to maintain a DCR of 1.3 or 1.4 where your property is yielding 30 percent more revenue than the cost of the mortgage.

3. Diversify Your Portfolio

This is as basic as it gets. Invest in different kinds of properties, sectors, and markets. This will help you minimize your risks.

Recommended Read: 5 Tips for First-Time Investors to Invest in Commercial Properties

4. Always Project The Cash Flow

Some investors get so carried away with anticipation, market trends and emotions that they don’t project the cash flow of their property. Don’t be one of them.

Project your cash flow. Stay away from the negative number unless it guarantees a massive jump in valuation in the next cycle.

5. Apply The 1% Rule

Yes, it can get confusing when deciding whether the property is worth the investment. If you’re in the same situation, apply the 1 percent rile.

The rule is quite simple. It states that your investment property should rent (monthly) for at least 1 percent of the total price you paid for it. If not, it might not necessarily be a good choice.

6. Set Your Investment Goals

Without a goal and plan, it’s like walking blindfolded. You will never be able to build a good portfolio.

A profitable real estate entrepreneur always have well-defined short and long-term goals, and a definite plan to back up those goals.

If you don’t have one, outline today.

7. Don’t Follow The Crowd

A crowded market is usually overleveraged. So, while you should definitely learn from the market trends, never follow a crowd blindly. Do your analysis and take an informed decision.

Often, when the crowd is going left, the right is the right direction.

8. Hire A Real Estate Investment Company

No matter how savvy you are, you would still need professional help by your side if you’re serious about building a portfolio.

So, look around, do your research and find one of the top real estate investment firms. From unearthing you newer opportunities to helping you connect with a network of investors and builders — the right company can be of great help to you.

9. Know When To Exit

Some of your bets will go south. And there’s nothing much you can do but to make an exit even it means taking a loss.

So, always have an exit strategy.

Recommended Read: When is the right time to sell your investment property?

These are some timeless tips from successful real estate entrepreneurs. No matter your style, requirements and goals, these tips vouch to pillar your journey to the top.