Real Estate Investing Clichés and Why They Matter
We all use them. We all hate them. Clichés. These timeworn and shopworn turnings of phrases are so rote they make your head spin.
But buried beneath the downhome meanderings, clichés in real estate sometimes actually do matter. Here are some to ponder.
All Real Estate Is Local
This is the granddaddy of clichés, but that is because it is the absolute truth. We always tell potential investors to know everything they can about the area around any potential building or housing purchase. That can only be done by knowing the local market inside and out. This isn’t just a market like Cleveland or Kansas City; it’s a granular knowledge of neighborhoods and even individual streets. Many investors who are starting out choose to buy in markets where they live or where they grew up, because they have this local knowledge in hand already.
Location, Location, Location
It sounds like an announcer on a bad infomercial trying to get you to buy something by repeating it often, and that is why it works. This beats into your head that you need to know your area before investing. Who are the big employers? What type of renters or home buyers can you expect? What’s the right budget for a rehab? Location is a huge determining factor in answering all of these questions.
Buyers’ Market/Sellers’ Market
Look at all the sales in your local market. They are half sellers and half buyers. This cliché is a crutch for many people to explain why a property is not selling. However, knowing the overall trajectory of your market is important. For example, knowing how tight inventory of homes to purchase is in your market will affect your buying strategy in significant ways.
Hidden Gem
If a house were a hidden gem, you wouldn’t see it on Zillow or on the MLS. So beware of listings that promote a house as a hidden gem. Instead, find your own by driving for dollars, developing relationships with Realtors, wholesalers, and more. Many investors rely on off-market listings—true hidden gems—to sustain their business. Develop the skills of mining these gems yourself.
Know Your Numbers
When it comes to real estate investing, successful property owners need to know their numbers. This is more than traditional real estate metrics like square footage and mortgage loan payment. You need to know your ARV on a FixNFlip project so you can set your construction budget appropriately. You need to know your DSCR on a rental property before you buy it. Making sure that the numbers work for your investment to drive profit over the life of your loan is an essential if you want to succeed.
Conclusion
People use clichés to make themselves look like they’re in the know, but real estate investors can’t afford to bluff. They need intimate knowledge of neighborhoods at a street level, housing inventory trends, off-market property sources, and more to succeed. So if you want to succeed as a fix-and-flip investor, SFR owner, or multifamily property owner, move beyond the clichés and ensure you’ve got the knowledge you need to succeed.
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