My Top 3 Lessons Learned from Real Estate Investing

I was recently asked, "What are the top 3 things you have learned from investing in Real Estate". It caught me a bit off guard. But after thinking it through, here's what I came up with:

1) Location is still key. There's usually no point investing in a beautiful property, with all the amenities, even if it has great cashflow if the location is bad. If you aren't looking at what the growth potential, or the downside potential, is for the area, you could end up being very disappointed. It's pretty easy, once you know what to look for to pick an area of your city that is likely to beat the city's average growth rate over the next 5 or 10 years. Also, if you invest in any renovations, they can be worth a) the cost of materials in a flat market b) less than the cost of the materials in an area that is in decline, or has a dump about to expand down the street c) more than the cost of materials in an area where new development is happening and transportation links are being expanded nearby.

2) Nothing is as easy as the infomercial gurus say it is. In principle, you can simplify the steps to "analyze, buy low, fixup, sell high", but there are a lot of ethical and time-management decisions to be made along the way that will swamp anyone who doesn't have good social skills, self-discipline and work ethics, and a great deal of persistence.

3) You have to spend a lot of time learning the various aspects of Real Estate Investing to bite off a chunk that you can work with. If you spread yourself too thing trying to make every potential deal work all by yourself, you will burn out (and run out of money fast). Once you know the economic model and the type of people who complement your abilities, you can focus on becoming an expert a a "part" of the real estate market that you have a good chance of succeeding in.

There's no silver-bullet, unless someone hands you a lot of resources and time.

- Scott