There is no such thing as a “no-brainer” in real estate investing; it’s all about the numbers. And when you understand what real estate investing is and are serious enough to do it by the numbers (not by the seat of your pants) then investing in real estate can pay you big dividends; otherwise you lose money or would have to consider yourself lucky.
Sure, there are a few that dodged the proverbial bullet and can claim that they have made money on income property without sweating all the numbers, but they are in a league of their own. Like a lottery winner, they were simply lucky.
Here’s the reality. At the end of any investment day real estate investing generally results in one of three possible outcomes: (1) It can make you money, (2) it can cost you money, or (3) it can make you less money than it might have made you otherwise. Moreover, it’s your actions that are more prone to decide the outcome, not the alignment of Jupiter with Mars. Its best, therefore, to consider the right way to invest in real estate and not simply to throw caution to the wind with your fingers crossed. Enough said.
So from this point on we’ll assume that you aren’t a gambler at heart, that you don’t expect to win the lottery, and that you want to learn by the numbers what it takes to succeed at real estate investing. Okay, but you must remember that it’s all about the numbers.
Foremost, you must learn how (and have the ability) to determine a property’s cash flow, rates of return, value, and a handful of other key measures so you can read the property’s vital signs and judge its health to the degree that you can accurately decide whether it’s an investment suited enough for you to invest your money.
The old adage is true: You make your money when you purchase, not when you sell. This means that you must only purchase investment real estate that promises a profit because the numbers (crunched more than once) say so. If the numbers don’t add up, regardless of how good the price looks or how enchanted you are with the property, don’t buy; or at least protect your wallet until you dig a lot deeper.
Okay, but it doesn’t stop there.
When you run the numbers on properties you already own you can add a substantial degree of control over the outcome of your investment results and vastly improve your chances of keeping your net worth intact. For example, being able to run and make clear presentations of your property’s net operating income and cap rate can help you argue a property tax assessment if a dispute arises, maybe obtain better financing during a refinance, win over an investment partner, or justify a sale price when you decide to sell.
You get the idea. Whether you’re buying or selling rental property, or just trying to decide what to do with property you already own, the numbers tell the story, so it makes sense that when you can run, evaluate, and present those numbers correctly you are more apt to maximize the potential of making or saving thousands of dollars on every perspective real estate investing opportunity you choose to consider.