Updated: Jul 4, 2020
The most important rule when investing in real estate is not what you may think! Of Course you want to buy low and sell high but is that really the mot important rule? Aaron explains what is the most important rule when investing in real estate in this episode.
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Aaron Fragnito: Hi, friends, it's Aaron Fragnito with the Passive Cashflow Podcast. I just googled what's the most important rule in real estate and I feel the answer was wrong. I'm going to talk about the right answer right now. Episode number 26 here, the most important rule in real estate.
So, when I went to the almighty search engine of Google to find out the most important rule of real estate, it told me that the most important rule is to buy low and make your money when you buy. Now, of course, that's hugely important. You never want to overpay for anything. You really want to pay $15 for a $20 bill in real estate, but actually, that's not the most important thing. I have maybe overpaid for a piece of real estate or two in my life and quite frankly if you manage it properly and hold it long term and it's in a decent market, real estate is forgiving over time.
The most important rule in real estate, in my opinion, is the management, the operation of real estate. Who are you working with? Who are you investing in? Now, if you're an actual hands-on active investor, then the most important rule is who are you hiring? What contractors are you hiring? I've made money in real estate, I've lost money in real estate and anytime we've lost money it's because we hired the wrong operator.
As I said, if I paid too much for real estate or perhaps I bought in a market that wasn't desirable and had trouble collecting rent, these were things that over time we fixed with better management of the real estate or hiring better contractors. Every time we lost money it's because we hired the wrong contractor who told us one thing and did another, or we hired the wrong management company that again over-promised and under-delivered or just straight up stole money from us.
In fact, we hired a management company one time and it was a nice family-owned management company and this is when we were getting started and we had a 25-unit down in South Jersey. They would meet tenants of the property and collect the first month's rent in a security deposit and they'd meet another tenant at the same unit two hours later and collect the first month's rent security deposit and they'd lease out the same unit to three or four people on a day, collect all the money and, of course, it'd be a mess the next day as they ran off with the money.
We had to actua