The 5 Golden Rules of Real Estate Investing

These are the 5 Golden Rules of Real Estate Investing that I have lived by, which has helped grow my portfolio from $0 to several million invested in Real Estate since 2011. Enjoy! Add me on Snapchat/Instagram: GPStephan

Join the private Real Estate Facebook Group:

1. Make money when you buy.
This is absolutely crucial when you invest in real estate - you either need to buy into cash flow, buy into equity, or buy into a combination of the two. Do not do what everyone else does and buy something at market rate for market rent without allowing yourself some room to improve those numbers, and your investment

2. Never fall in love with an investment
This is one I see too many people fall victim to. They go out to look for an investment, then see a home they “fall in love” with, despite it being a terrible money-sucking investment. But hey…maybe it’s just really charming, or reminded them of their childhood house, or whatever…point being, if it’s an investment, it’s a BUSINESS. Not a romantic-comedy. You cannot get emotionally attached to a property you’re investing in.

3. Big picture, laster focus
While the bigger picture is fine to pay attention to, local markets are much more important. Don’t get too caught up in headlines and following trends because real estate is such a micro-economy. Each property and city is its own individual investment opportunity. While they can trail overall economics, every single property is like its own stock - some are undervalued, some are overvalued, some are going up in value, some are going down…the specifics are what make this type of investment really, really unique. Your market will have its own opportunities outside of everything else that’s going on.

4. Think long term - get a fixed rate loan
This is one that I’m a firm believer in. Some people might disagree with this, they might want to take a riskier approach, but my philosophy is simple: buy once and hold. Even though you might be able to get a cheaper loan by going for a 5-10 year Adjustable Rate Mortgage, which means that your interest rate will only be locked in for so many years before it’s adjusted to market rate, it’s much safer to lock in a one-time rate NOW and then hold it. You know your holding cost will at least remain consistent throughout the life of the loan, until you either refinance, pay it off entirely, or sell.

5. Finally, make sure it cash flows.
You should focus primarily on your cash flow - how much money are you investing into the deal and how much will that make you every single month. Do NOT barely operate on a thin margin of cash flow unless you’re making a significant amount of equity and have the cash reserves to pay out of pocket if and when something goes wrong. The biggest problem I see happening is when people cash flow a few hundred dollars on their investment, barely scraping by, and then something comes up and wipes out a years worth of profit…even if they made a ton of money by paying down the loan, they need some type of cash flow for it to really make sense. Focus on cash flow, while still taking everything else into consideration. Cash flow first…everything else second, then evaluate the deal from there.

6. Bonus tip…don’t be your tenants best friend.
I’m a really, really nice landlord…sometimes too nice. When I first started, I really wanted to be buddy-buddy with my tenants and be the “cool” landlord. No. Bad idea. This is often when you get taken advantage of, even if its not even intended…this is when they start calling for personal favors, extended time on rent, or fixing things that aren’t your responsibility to fix. This often puts you in a difficult position between being a friend and being a business person. And once you’ve opened the friendship floodgates, it’s difficult to shift into the mindset that you’re running a business and that this is your investment. My biggest piece of advice is to treat it strictly as a business - be friendly to your tenants, but do not be friends. Stick to the contract and enforce it. It’ll end up saving you in the long run.

Suggested reading:

[KellanJames]

"Be friendly to your tenants, but don't be their friends" - this is fantastic advice, I plan on taking action based on it.

[peterc]

One of the smartest guys I know of. And you know what? He didn’t go to college. Thumbs up to you Graham for doing your own thing and educating yourself!

[breon]

AMEN to #6...!!! Don't Be Friends with Your Renters...

[GangiFilms]

Getting emotional with any investment is a bad combination.

[coldheart]

Your videos are amazing!!! I learn so much!

[Germ]

I am actually like binge watching these videos their so informative. 400k subscribers now congrats.

[kaydee]

Thanks for the advice and nice presentation very useful information thanks again

[mitchell.]

I agree that real estate is localized it depends on the population, inventory and other factors.

[hellstarvn]

I fell in love with a deal (buying a restaurant), what I didn't know is how bad the landlord of the building my restaurant is at and how hard it is to "keep the same staffs with a new owner". A big lesson.

[michaelthomas]

As far as I'm aware, in Australia, without a substantial downpayment, cash-flow out of a rental property isn't even possible.

[tarokimm]

Hey graham! Good info! Can you make a video on how to find equity in a house? Maybe you have already, but not sure. I just know the basics. Look at the price of the square ft of the house you’re interested in and compare it to other houses with similar sq ft and their price. I know there’s some math involved, but what else do you look for?

[FairwayStreams]

Investor checking inn.. boom... good info as always Graham!

[ParkerAntoine]

Simple and clear - but most importantly accurate and in your wheelhouse. More videos like this Grant. Always appreciate the content :)

[KingYang]

I actually heard your first rule from Dave Ramsey first. Glad to hear it from more than one source.

“The profit is made at the purchase!”

Keep it up man.

[usamahafeez]

I like a lot your videos. Thanks for your important advice and life philosophy. :)

[skyblue]

Always follow the 3 Fs. Firm, Fair and Friendly.

[arjun]

Graham i have to say thank you for giving me so much knowledge i have learnt alot from watching your videos! Im 18 and hoping to buy an investment property in the near future keep up the good content!

[anitap]

U r just brilliant! I always ẹnjoy & learn a lot from ur videos! 👏👏👏
I m so grateful to u! I m gona try to watch all ur videos & try to absorb all ur teaching n i ll start investing on a house within a year. 😊

[cosmic]

Thank you so much for this, Graham! I’ve only been watching your videos for a short period but I’ve learned a tremendous amount from you not only on real estate, but credit, mortgage, etc. Again, thank you! Also what kind of leather jacket is it you’re wearing in this video?

[SteveAubrey]

Another great video! Keep up the great work Graham!