Some like to invest close to home, will not even leave their neighborhood. Others will venture outside the box, their state, even their region or country. There are some things that are very important when looking for deals. The biggest mistake new investors make is to purchase their first investment property at market value and hope for appreciation. This is called speculation and is not recommended. Furthermore, these mistake prone investors usually follow the herd and purchase when markets are high. Now who has success with Buy High, Sell Low? It is crucial to avoid speculation as you cannot predict or control the market, rather control your success by purchasing with equity, strong cashflow and multiple exit strategies.
Following the herd can get you in trouble. In fact, some of the most successful real estate investors do exactly what the herd or the masses are not doing. We recommend doing the opposite of the masses such as Buy right now while everyone is Selling. Buying now while the markets are low is not enough to succeed, investors must buy with equity, strong cash flow and multiple exit strategies. That way worst case scenarios such as huge value reductions, worsened economic conditions, vacancy, etc can occur and you will still be safe with the investment. We back it up with tons of research to find High Return deals with Very Low Risk!!
- Affordability - If a market is not affordable similar to how much of the West and Southeast became during the peak, you are likely buying High and could see some crippling depreciation. PMI has incredible research and information on market affordability and probability of depreciation. Indianapolis is considered the most affordable market as is much of the MidWest.
- Rents - A good cashflow deal is when rents are 1% of purchase. However, we often find deals with 2-3% which are tremendous for cashflow and significantly improve return and minimize risk.
- Purchase with Equity - Purchase with at least 30% equity or 70% LTV. We focus on 50% equity.
- Have Backup Plans - Multiple exit strategies significantly lower risk. While selling at retail when the market is high, it is often not realistic. Make sure you can sell to investors, wholesale, refinance, rent, hold and/or lease option.