15 Real Estate Investing Tips For Financial Success in 2023
Whether you’ve just read Rich Dad Poor Dad, and you’re ready to grab a hold of your own financial freedom… or you’re already in the “weeds” of real estate and need some tips…
We want to give you our top (must-do) tips to succeed in your real estate journey!
If you want to jump straight into the actionable tips, just hit any of the links in the “table of contents” below, and skip our intro:
- 10/10/10 rule
- The tools you need today for REI success
- Cut out the realtor as much as you can
- Find off-market
- What matters is cash flow
- However… Don’t NEGLECT appreciation
- Talk to people — Don’t Be an Introvert
- Rental maintenance is higher than you think
- Learn to buy owner finance — the most powerful tool in REI
- Choose your asset class well
- Learn to be a great manager
- Be GREAT at analyzing deals
- Don’t be a “1-offer-shop” – intro to Creative Finance
Note: Some of the links in this article are affiliate links, which means we make a small commission if you buy something. You don’t pay anything extra by purchasing through these links. See our affiliate disclosure for more info. Thank you!
Who are we
Before we jump into those tips… you should at least TRUST that we’re not some hired virtual assistant who wrote this article… or an AI tool that’s never invested.
We’re investors ourselves (well I am).
I’ve invested in single-family houses, land, and mobile homes, and flipped those assets as well — as well as loaned on those assets. I’m also a marketing service provider for investors co-owning a company called “OmniDrip“. The bottom line is this: you can trust that I’ve at least been in the weeds of this!
Before we get into the real estate tips you’re here for (and just hit this jump link if you want to get to that already)…
… Let’s get into why we believe real estate is one of the best vehicles to achieve your financial goals…
Why Real Estate?
There are MANY ways to make money in this world.
But when you boil it down…
… There are really only 3 main ways to make $$:
- Working for money (When you’re not working, you’re not earning)
- Others make money for you (You create a business)
- Your money makes you money (real estate, lending, notes)
To achieve financial freedom…
You CAN’T do it by working your whole life.
If something happens (life events or you’re just tired of working), then you can’t work, and you can’t earn.
The best scenario is option 3: Your money works for you.
And this is where you’re either lending money and it’s producing a nice interest rate… or you own real estate that’s producing cash for you (later on, we’ll show you how to buy real estate with little money).
Sure you can build and create a business; by hitting it big with a business you can have enormous wealth fast — but it’s EXHAUStING and stressful managing employees. We’d rather be in the later boat, where the only thing you have to manage is your assets (we’ll talk about managing assets later).
Now, we have 1 last main big tip before we jump into our action list of real estate success tips because this is important for those that are new (however if you want to skip onto the tips section, hit our jump link here)
Because some may be wondering…
How Real Estate Investing Works – Strategies for Financial Freedom
To make your money make money for you… you’ll need to understand how the real estate market works. Most understand and believe that it’s in “rentals”; that, THAT is the key to financial freedom.
But it’s actually deeper than that.
Because there are NUMEROUS ways to make your money work for you and we’ll touch into a little bit of that here.
1. Simple Single Family Rentals
This is what everyone knows.
You buy a property and rent it.
And after you subtract/budget out your future maintenance fees (jump to this section to see how much maintenance actually costs)… you’re left with the CASH FLOW.
And cash flow is one part of your equation.
Because after the deal is done, and you get (good) tenants in place, you can sit back and allow your money to make you money every month.
However, in some markets prices are TOO expensive to be able to positive cash flow: The mortgage is $2,500 a month but the property rents for $2,000 (we’ll go into some tips below on how to control your mortgage so you can cash flow some properties like these).
So you either have to shift the way you buy (Jump to this REI tip for this) or switch your asset class…
2. Commerical property
You don’t have to be a long-time experienced investor to jump into the commercial property asset class (when I say “commercial property” I’m talking about Mobile Home Parks, 5+ unit buildings, etc).
The art of commercial property investing is in finding and negotiating the deal; AKA:
The art in commercial is putting the deal together.
If you know how to FIND the deal (we’ll talk about this later), and you know how to analyze the deal (VERY different from single-family houses)… you can successfully make one of these deals happen.
Different from what you might think… YOU personally don’t need a ton of money.
There are people who are “syndicators” whose job is to find money and put the deal together — hence the “art of the commercial property is putting the deal together”.
If it’s a good deal… money is out there for it.
But maybe this asset class isn’t your cup of tea…
If that’s the case, check out this strategy…
3. Real Estate Notes
This is one of my favorite strategies for passive income. This is where you own the “mortgage paper” on the property.
What’s the “mortgage paper”?
The loan docs… AKA: the owners of the property OWE you. money and pay you every month for it.
Just like how a bank works.
There are a lot of ways to do that we go into too deep here… but know that you can either BUY the mortgage note from someone else or create one yourself (buy selling a property owner finance).
This is a GREAT way to invest because you create a stream of passive income that requires no maintenance. There are cons of course: One is that you don’t own the property so once the loan is paid off your income stream dries out.
This is the last strategy we’ll mention here… but if you have contractors that can rehab houses for you, you can always buy houses at a discount, fix them, and flip them.
This is essentially getting your money to work for you (this falls more under the “business” category of making money, however).
Let’s finally jump into our success tips for becoming a real estate investor:
This is a “rule of thumb” when it comes to buying.
And it was made famous by an old-school successful investor named John Schaub (check out his book here).
Basically, it works like this:
Only buy a property if:
- It’s at least 10% below market value
- With only a 10% down payment
- And no more than a 10% interest rate.
It’s a good rule of thumb that you can be flexible with.
But don’t be too strict. You can compensate your buying strategy if one “rule” is much better than others. For example… if you’re able to get a 30% discount (very possible and we’ll show you how later), you can be a little looser with the other rules and perhaps put more money down.
You might be asking: “When do you ever get a 10% interest rate??”
Believe it or not… most of the real estate interest rate history has been above 10% rates. You live in a time where it’s outside the norm — and perhaps we’re moving back to these higher rates (who knows?)? — However, if you buy subject-2 or owner finance (we’ll cover this later) you want to make sure you’re not buying with too high of interest rates.
There are some tools we recommend (hence our name) that could make your life MUCH easier as an investor. And we’ve listed our top 5 below:
1. Driving 4 dollars app
A great way to find great real estate investing deals is driving around looking for distressed properties. These can be good deals as you can buy them for a discount. You can either carry a pen and paper with you while you drive around OR…
… You can use the Deal Machine app (You can use our special coupon code “TOOLSWITHDEALS” to get a free trial and special discount).
It makes life WAAAY easier when you’re “driving 4 dollars” because it tracks your driving route. And when you come across a property you like, you just swipe the house on your property (it takes less than 1 sec), and it saves the property — you can even send that property a letter saying “I’d like to buy your property …” with 1 swipe from the app.
Check out our complete review of Deal Machine here
2. Property Analyzer
When you’re analyzing deals, you’ll need to sometimes dive into who owns the property, how much they owe, and what the property might be worth.
But what makes Propstream unique is that they can pull a list for you at a VERY affordable price. If you’re planning (or already are) an active investor who’ll be marketing for off-market deals throughout the year, the price point of Propstream makes a lot of sense. You pull a list and then market to find deals.
3. Rental management software
When you start accumulating rentals, you’ll need to MANAGE those assets. A great way to do it is via affordable software like Buildium.
No more spreadsheets, or trying to keep track of maintenance, costs, tenants, etc in your head. Buildium can track of the tenants, the agreements, the maintenance schedule, etc.
It’s more suited for property managers or those who have a portfolio of 3+ properties and are self-managing. If you’ve already started self-managing your portfolio, we recommend Buildium.
4. Phone Dialer and Skip Tracer
When you start looking for your own off-market deals (which we’ll cover in a bit), you’ll want a tool that can easily FIND property owners’ contact information and also a good dialer to make your life easy when you’re calling these owners (to ask them if they’re interested in selling and that you’d like to buy it)
Batch Dialer can not only skip trace properties for you on the fly (skip trace = finding phone numbers of property owners) but also help you make calls with the touch of a button. They have a free trial here.
Licensed brokers and agents aren’t going to like this bit of advice — and we might get some hate mail for it but we don’t care cause what we’re about to say is the truth:
Realtors get paid too much.
And it’s hurting your ability to get a good deal.
On a typical $400,000 house, if you pay 6% on commission to an agent, they get paid $24,000 from either the seller or you, the buyer, or both (typically it’s out of the seller’s equity — but still the seller has to keep that number in mind when negotiating which limits how low they can go to make you a good deal).
And what exactly do they do?
They shuffle paperwork to the title company who does most of the heavy lifting. Agents don’t carry any risk, the title companies do — and yet, an agent can get paid 3x more than a title company.
Agents become the “middleman” between you and the seller which can turn into a game of telephone and miscommunicating.
You’re better off talking directly to the seller where you are in control of asking the right questions — most agents a poor at negotiating and can have a tendency to favor offers over others if it suits their commission better (it’s illegal for agents to do that, but they still do it).
So how do you do this?
- Go to sellers directly before their house hits the market (we’ll go over that in a bit)
- Don’t use your own buying agent… just find properties listed and call the listing agent (you don’t cut out agents completely but you’ll save some equity and have a little bit more leverage with the listing agent if they also represent you)
The number 1 way to buy real estate (regardless if it’s for investing or for your primary residence) is buying going off-market.
There are basically three reasons to do this:
- You cut out the high commission you’d pay a realtor — They do little work in the transaction itself. The title company does most of the work
- You can present creative buying solutions for the seller
- You can get deeper discounts — with no relator in the way, you can ask offer lower than what a property is worth (which when it comes to investments, we almost always recommend you buy at a slight discount — remember our 10/10/1o rule
If you’re asking: “Why would a seller sell at a discount??”
They’re a host of reasons:
- They can sell it FAST — if you’re buying with cash or creatively (we’ll cover that later)
- They can sell as-is — if the property is distressed they’ll have a hard time selling it
- They can sell with confidence — if it’s a slow market and they NEED to sell, they need a confident buyer, like you.
How do you find deals off the market?
1. Driving for dollars — (we covered this a little bit, but using an app called Deal Machine to drive around finding distressed properties and contacting the owners (make sure you use our special discount code “TOOLSWITHDEALS”)
2. Talk to people — We’ll cover this later, but always talk to people in your market and ask: “Do you know anyone looking to sell?”. Being the first to a seller before they contact an agent is a great way to make a deal directly with a seller
3. Marketing — By pulling a list of houses from Propstream you can call those houses using a dialer like this one... or blast text the contacts… or drop handwritten door hangers like these… you can market directly to potential sellers at mass.
4. Online — You can have sellers go to you directly when they search “Sell my house fast” and find your website. You can literally have this type of website (with all the content you need) ready to go overnight with this company here called “Carrot”.
Check out our review of Investor Carrot here.
The number 1 metric that makes real estate investing work, and what achieves your financial freedom is cash flow.
Buy property/assets you plan to hold onto only if it cash flows.
We understand that there are other strategies to real estate… like negative cash flow until you sell on appreciation… or buying for tax shelters…
But if you’re reading this right, it’s probably because you want financial freedom yourself and the path to that is cash flow.
Every property/asset you hold on to have to cash flow (or break even, that’s ok too if you’re in an expensive market where rents historically go up).
Being in a property where you’re paying out-of-pocket every month just to hold onto is a LIABILITY and never an asset.
If you’re relying on appreciation to get paid you’re gambling and not investing.
You might have heard the term: “Appreciation is on top”…
Well with that being said, let’s talk about appreciation a bit more…
Cash flow is king…
However, appreciation has been the greatest vehicle to wealth.
So keep that in mind when you’re researching markets and neighborhoods to buy in.
You WANT to buy in areas that are appreciating in value. That is the ultimate way to secure your investment and grow it. Cash flow helps maintain your asset and give you some passive income today… but appreciation is the big payday if you ever decide to sell or refinance.
For example, if you buy a $200,000 house with 10% down and in ten years it doubles in value (NOT unusual in good desirable areas), your $20,000 down payment turns into $220,000… not bad.
This is not only a DEAL-FINDING mechanism… but in all-in-all “business strategy”.
You can’t find deals off market by hiding in your house.
If you’re looking for deals in your local, you have to get out and talk to people (even if you’re buying deals out of state, you still have to talk to local “boots on the ground” people to find good deals, contractors, and vendors)
Visit estate sales and ask: “Are you looking to sell your house?”.
When you meet new people ask them: “Hey I’m looking to buy a house in this area directly from an owner, do you know anyone looking to buy”.
You don’t want to be shy about it.
You’re LOOKING for a house to buy… there’s nothing wrong with that and nothing wrong with asking — you’ll be leaps and bounds further than the person waiting for something to fall on their lap
Don’t be fooled into thinking that if a house rents for $2,000 and your mortgage is $1,800 you’re cash-flowing.
Most likely, with those numbers, you are NEGATIVE cash flow.
When owning an asset, you have monthly costs.
Here’s a list of costs you must budget for every month (physically take the rental income and put it into a bank account):
- Maintenance (you will pay for maintenance of the property in the future; prep for it)
- Capital expenditures (big ticket items like roof or water heater)
- Property taxes
- Property management (even if YOU are doing the management, you still want to budget for it in case you hire someone later)
These are some… but typically (depending on the condition of the property — a brand new home will obviously have a long ways to go to pay for a new roof — landlords see anywhere from 35%-55% of their rental income being budgeted towards all the expenses listed above (total).
So given that same example above, if you have a property that rents for $2,000 then you should be budgeting (monthly) anywhere from $700 to $1,100 for expenses. If you want to make at least $100 in cash flow, you only have room for a mortgage of $1,200 – $800.
TIP: Keep in mind that if you buy a property in a desirable area, rents appreciate too. So if you buy right, and you only buy with a cash flow of $100… with time, your rents go up and ALSO your cash flow.
So now, if you’re wondering:
“Well in my area the typical house is $400k at $2k rents… so I CAN’T cash flow here!”
There’s a powerful buying tool that helps your cash flow even in expensive markets…
The single most powerful way to buy property is by making payments to the seller directly –rather than to a bank or lender.
When a homeowner owns a property free-and-clear, you can make payments to THEM.
The advantage of this is these:
- You control the terms (you can ask for whatever amount down, interest rate, etc)
- You can negotiate later (A bank won’t ever re-negotiate AFTER you’ve bought a property — but with regular folks, you can go up to them and ask for re-negotiate if you’re in a bind)
- You can buy with cash flow (if you keep in mind that you could only buy this property if the mortgage is $xxxx amount — because that’s the only way to cash flow — you can ask for that payment or no deal
There are a lot of people that are happy to do this as long as you look and feel like a confident and responsible buyer — that’s key.
And when they trust you… you can ask whatever terms you like.
The most important metric in buying owner/seller finacne is NOT the price or the interest rate or years..
… It’s your payment.
If you have a low payment that gives you cash flow… it doesn’t it really matter how long the note is (it doesn’t have to be 30 years… it can be 50 years+), or what the interest rate is.
Because you have an asset (hopefully appreciating so that rents grow) that is paying for itself AND paying all the expenses AND paying you some income forever.
Each market is different.
Some have very highly appreciating Single families houses… others have high cash-flowing multi-families…
There has been a looong-lived debate between MFU vs SFH.
But the bottom line is what matters in YOUR market.
There are pros and cons to both but it’s highly dependent on your market — so study your market. Find the areas that are good neighborhoods ( if there aren’t that many maybe MFU is a better choice)
Also know the type of class of asset.
For example, some areas are C-Class areas and below (real estate is usually classified from A to D+ and the higher the grade the BETTER the neighborhood… but typically higher means more expense and less (if any), cash flow… while lower grades mean cheap and bigger cash flow (but bigger headaches, bigger costs).
So know what your target market has to offer and fix your investing style around that.
This is far from being a super “ninja sexy” real estate tip… but it’s waaay overlooked.
Most successful people are also great managers.
Managers of their time, their money, their family, and their assets.
Create for yourself a schedule of how you do things; aka a system and you’ll be leaps and bounds ahead of others.
- How many hours do you spend Driving 4 dollars
- Every week budgeting and/or doing your books
- Every month evaluate your financial statements
- How many hours (or how many calls) do you spend cold calling
- Creating a way to manage your maintenance schedule (or using this tool)
There are a few handfuls of skill sets you MUST know as a real estate investor.
The most important is knowing how to evaluate a deal.
This takes a few knowledge sets:
- Knowing how to comp prices (looking at similar assets and determining what the market value of the property you’re looking at is from past recent sales)
- Knowing how to determine rents (by looking at other rentals and determining what YOURS will rent for. This can be more of an art because there’s not a whole lot of data)
- Knowing how much repairs are going to be (if you’re walking a property, you have to know what needs to be repaired for the market and how much that will cost)
- Knowing the market in general (knowing which neighborhoods are good and which aren’t, know which streets are septic vs sewer lines, knowing which run on well water or city water, etc… knowing the ends and outs of YOUR market can save you from bad deals, and help you find good deals.
The last real estate investing tip is a powerful one and we covered a bit earlier…
… And that’s to learn how to offer MORE than just cash or bank loan.
This is a bit more advanced but it’s is an important tip for wholesalers and flippers, but if you ONLY offer one type of offer — like only cash, or buying with a bank loan… you’re limiting your potential.
Here’s what I mean:
With a cash offer, you’re limited to only a 75% discounted offer (if you’re wholesaling).
But if you can buy on payments… you can increase your offer to certain sellers.
If a seller says NO to your low cash offer… you might want to offer owner finance…
… Or Subject-to-the-loan (where you buy by taking over their mortgage payments)…
… or a master lease (where you sublease the house to a tenant; for example, the landlord/owner rents the property out for $1,000 but you negotiate to pay that amount every month but you then lease it out at $1,300)
… or a lease option (Similar to a master lease where you lease the property from the owner and then sublease but this time you secure the rights to buy the property later –called an “option to buy” which is a recordable document).
And this isn’t limited to just methods buying…
But methods of selling too.
If you know wholesaling, flip, and HOLD… and the property has the ability to be refinanced later, or have the ability to sell the interest to investors later… you open up your ability to make money dramatically.
While this is more of an advanced technique.. you will have to get to this point sometime in your investing career.
For now… stick with the top tips in the beginning…
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