Investment Property: An Easy-to-Follow System for Building Wealth Through Ownership
The power of systems cannot be underestimated. Every time I’ve accomplished something in my life, it’s because I had a goal, then I followed a system to achieve that goal.
What I find interesting about real estate investing is that many people just jump in and buy a property, without any kind of plan.
The property that I have felt most confident in buying is the property that we purchased just a couple of months ago. This is because over time we have come up with the right real estate investing system for us and use a checklist when buying a property.
This checklist has been developed over time, through experience and education. We are committed to learning and specializing in the right type of investment strategy to achieve our specific objectives.
This is a path I have seen some real estate investors take. Let’s use the example of a husband and wife who also have full-time jobs.
The first property they buy with the intention of renovating the property and selling it. This was his first renovation project. They did most of the work themselves on weekends and nights when they got home from work. The project took longer than expected and they spent more than the budget. The property took more than six months to sell. They made very little money on the project because they overspent on the budget and the additional loan costs of holding the property for six months longer than they expected. The determined reform was not for them.
A friend had made a lot of money doing a small subdivision and suggested they try it. They found a three-bedroom house on a large block of land. The large block of land presented them with the opportunity to subdivide the block and sell the new block of land at the rear of the property, while keeping the three-bedroom house at the front.
This project was a success and gave them the confidence to attempt a larger development project. They purchased a large parcel of land, which had the potential to build eight units, subject to council approval. They suddenly realized that an eight unit development project requires much more skill, experience and time than a small one block subdivision of land. Given their lack of time and experience, they decided the project was not for them and sold the land after holding it for two years. They lost money due to borrowing costs while they had the land.
Beginning investors try many different strategies, never excelling at any one. They are always learning. Learning is hard. While you’re learning, you don’t know what you’re doing… and it’s natural for you to make mistakes. And with investment, mistakes can cost you money. A bad experience can make a potentially successful investor see the wealth-building potential of real estate investing.
However, if you find a strategy and learn it well through experience and education, you will find that the third property you buy is a better investment than the second, which is better than the first investment property you bought. Instead of always being a newbie to different strategies, he specializes. Once you’ve found your winning formula, you can repeat it over and over again.
Our strategy is to buy and hold properties that meet all the criteria on our checklist, manage our finances to ensure we can hold them for the long term, and then watch property values rise. We already test promotions, renovators and many specific types of properties as they do not fit with our specific investment system.
