Even a Toronto Blue Jays fan appreciated the work ethic and charm of Yogi Berra, the New York Yankee who passed away recently. Much has been written of the statements attributed to Yogi and their deeper meanings. Here are five valuable lessons for those considering investing in real estate.
“If you don’t know where you are going, you might wind up someplace else”
Have a plan before you start looking for a location to invest in real estate. Look for areas where unemployment is low, with schools and public transit nearby. A good rule of thumb is not to invest anywhere when it takes you more than 1 hour to drive to the property.
“You can observe a lot by watching”
When you try and take in all the information out there relating to a potential real estate investment, it feels sometimes as though there is too much information. How do you make any informed decision? Watch what experienced investors look for. Hire a real estate agent who invests themselves, Make sure you properly qualify all tenants in advance. Use a property manager so you don’t have annoying phone calls about repairs in the middle of the night.
“Nobody goes there any more, it’s too crowded”
It is never a good thing to be the last person to buy in an area, at the top of the market. Look at areas where Starbucks and Home Depot are expanding to. They have done their own research to make sure that the area is expanding. That is where you want to be.
“The future ain’t what it used to be”
When you buy real estate, it should not be for an expectation of a quick flip for profit. As long as the property is cash flow positive and you can carry the property for a few years, eventually the property will rise in value. Then you do not have to worry about short term interest rate hikes or other external events that may affect the price of real estate in the short term. If you have a partner, make sure that there is an agreement in place that states what will happen if things do not go well down the road. For example, use a buy/sell clause to end a relationship without having to resort to lawyers or expensive court proceedings.
“When you come to a fork in the road, take it”
It takes a lot of courage to make that first investment in real estate. It is always easier to find a reason not to. Remember that with real estate, you are borrowing about 75-80% from a lender and your return will likely be much more than any investment in the stock market over time, primarily because you are leveraging the lender’s money. Have comfort that most people who do decide to invest in real estate, with the right research, are usually very happy later.
Remember, Yogi also said “I didn’t say everything I said.” Use these lessons to become a successful real estate investor.