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Haitham Sadek 1 Comments

I started investing in real estate almost 20 years ago. However, I didn’t give this lucrative investment vehicle the right focus until recently when I read “Real Estate Riches” by Dolf De Roos followed by a couple of seminars and courses which helped me to identify 6 Golden Rules to follow when investing in Real Estates to ensure strong returns on investments. While I made many very successful real estate investments, I made also many mistakes which convinced me to stick to these 6 golden rules and never deviate from them.

Let me tell you about one of these painful experiences. In 2006, the housing market in Western Australia was at its peak. My wife and I got excited by the profit made by many friends and family in the previous years and decided to invest in one of the emerging areas of Perth. For every house, there were many buyers competing and often offering to buy above the listing prices. We saw few houses (less than 10) and we didn’t like all of them.

However, we didn’t want to miss the momentum of the housing market. We decided to put an offer for a house at $370K. The house had a negative cash flow (i.e. Rent doesn’t cover mortgage and expenses). 10 years later, we sold the house at $320k with the significant loss.

The key lessons of this experience are part of the following 6 golden rules of properties investments

  1. Do your homework (100-10-3-1 Rule): For every 100 properties, you search, you will most probably like 10, put an offer for 3 and get 1 offer accepted. You must do your homework to know if you are buying a bargain or overpriced property. We didn’t do our homework when we bought the house in Perth.

  2. Always buy from motivated sellers: Always buy under market value from a motivated seller. Never buy at the peak when buyers are competing for every property.

  3. Buy in an area with strong rental demand (90-10 Rule): Stick to an area with high rental demand because of its proximity to the city centres, schools, transportations, parks, hospitals, universities etc. You can increase the chance of your property be rented by 90% if you reduce the rent by 10% below the market (90-10 Rule) which in many cases more attractive in comparison to long vacancy periods.

  4. Buy for positive cash flow: Rent of your property must cover and exceed mortgage and other expenses including assumed vacancy periods.

  5. Invest for the long term: Once you bought a positive cash flow property, never sell it unless there is a much better opportunity (50% or more) to avoid capital gain tax and initial investments expenses.

  6. Have a cash buffer: Always keep enough cash buffer otherwise you might be a motivated seller

1 Comment

Mohammad AbuArraThanks, Haitham, These are very simple, straight forward points that would guarantee successful investment in real states. thanks for sharing them.

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