Nick Statman- Learn the Fundamentals of Long Term Investing in Property

There are many reasons why people invest in property. The profitability, the excitement that comes with the fast-paced industry, the opportunity for growth, and the freedom. Long-term investing is defined as buying property and holding onto it as a way to make a profit. This is different from buying a fixer-upper and flipping it 3-6 months later. Long-term investing also offers a wide range of tax benefits, and investors can take advantage of appreciation, the opportunity for leverage, and the ability to create a consistent stream of passive income.

So what do you need to know about making your long-term investments work for you? What strategies and methodologies should you put into practice to increase your chances of increasing your ROI? Read on to find out. 

Buy and Hold Properties Are Your Friend

Investing in real estate is a great way to make money, but that doesn’t mean you make money overnight. Buy-and-hold properties allow you to take advantage of appreciation and build wealth for the long-term. Investors who use the buy-and-hold strategy usually plan to sell the home eventually, but in the meantime, they use the short-term rental income to help finance their investment. The money generated from these rental properties can help pay down the mortgage, which means more money to put toward the next investment. 

The fix and flip strategy is a good option for short-term income generation, but time and patience are required to build capital and meet long-term financial goals. 

Ask Yourself “Is this a positive cash flow property?”

A property may look great and be in an ideal location, but if it’s not cash flow positive, it’s not worth it. Will the property make you money right off the bat, or will you have to spend a significant amount first? If your goal is successful long-term investing, you have to make every decision based on the simple question “is this cash flow positive?” After buying the property, will the rental income be enough to immediately start paying off the mortgage or financing your next investment? If you’re not sure, use the 1% rule.

The 1% rule states that for a property to be considered cash flow positive, the rental rate should be at least 1% of the sales price. For example, if you purchase a property for £200,000, you should be able to get £2,000 a month or more in rental income. Find out how much tenants are paying in the area in homes similar to yours. If it’s not cash flow positive, it’s time to look for something else. 

Focus On Facts, Not Feelings

Real estate investing is a fast-paced industry where you have to make decisions quickly. But to build long-lasting wealth, you must make decisions based on facts, not feelings. This means basing your investment decisions on how the property matches up with comps in the area. It means carefully analyzing the rental income potential. Successful investors don’t base their decisions on whether or not they would personally want to live in the home. Long-term real estate investing is about strategy, it is not something you jump into haphazardly. Always conduct a real estate market analysis and investment property analysis for every property and look closely at rates, depreciation, mortgage payments, interest costs, and net ROI. 

Prioritize Premium Locations

One of the most important fundamentals of long-term investing is location. A property can look great, be cost-effective and be cash flow positive, but if nobody wants to live there, it’s all for nothing. Property investing 101 teaches us that location is the most important factor when investing, and long-term investments are no different. The right location increases demand for the property and makes it easy to target a wider pool of qualified buyers. Do not settle for a less than desirable property and simply hope for the best. Prioritize premium locations for successful investing. 

Invest In Continued Education

One of the best things you can do for your property investment portfolio is invest in continued education. The industry is constantly evolving, and trends and strategies that worked last year may not be as effective this year. Investing in online courses, workshops, and classes will help you network and brush up on vital skills that will help you be successful. Listen to podcasts and audiobooks that dive deep into the property investing world, read books, and find a mentor who can help teach you more about long-term investing. Continued education is one of the best gifts you can give yourself. 

Work With Motivated Sellers

Seasoned investors will tell you that time is money. This is why top-performing investors don’t waste their time with unmotivated sellers. There are far too many motivated sellers out there just waiting to get their property off of their hands to spend time trying to convince someone to sell. A motivated seller will be more likely to negotiate and work on your timeline. Typically, motivated sellers are willing to go 10-30% below market value to sell their homes. This is why it is worth it to seek out those who are eager to sell and not waste your time on those who won’t budge.

The Takeaway

Long-term property investing has the potential to be an extremely profitable investment strategy, but success doesn’t happen on its own. To make money this way, investors must be patient but quick thinking, focused on the data, the location, and the cash flow potential. 

For more help in growing your property investment portfolio, connect with Nicholas Statman on Linkedin

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