4 Tips to Building your Investing Philosophy

4 Tips to Building Your Investing Philosophy


4 Tips to Building Your Investing Philosophy

An investing philosophy forms an essential part of your business. It serves as a guide that lets you make the right decisions that could bring the best benefits. If you are planning to invest in multifamily homes (or any real estate set up for that matter), it’s essential to build your philosophy from the get-go.

Apparently, the goal of being in business is to generate a healthy cash flow. You will always have to come up with the desired revenue number. Still, in order to get from point A to point B, you need to build a bridge first.

Investing in real estate is like building a bridge. There’s a gap between you and your goals. To reach them, you need to acquire all the necessary materials and tools to form the bridge. Your capital financing serves exactly this purpose. It’s only a matter of knowing how to use these tools in order to form a strong structure.

This is where your investing philosophy comes in. It serves as the blueprint to the bridge you are building. It includes how you are going to approach the project and how you are going to maintain it.

Now, tell me, is it possible to build something without a blueprint? Of course not! It’s imperative to build an investing philosophy since everything else flows from there.

Naturally, a good structure should have a good plan. With that said, it’s important to build a philosophy that secures your dominance as a real estate investor.

Know your real goals and establish your process

A good plan starts with knowing what it is you really want. Still, many people find it easier to say “I want greater wealth.” To speak generally about your goals is no problem. However, you still need a clear target and process if you decide on taking action. Before I started investing in multi-family properties, I started out buying single-family homes. It paid well, but at the time of the Mortgage Crisis a decade ago, the multi-family sector came out strong. That is when I decided to focus more on multi-family homes. I didn’t focus more on the cash flow, so I put a lot of effort into expanding the resources and investments I had. This allowed me to open up new areas of opportunity which generated large income streams.

Weigh the risks

A well-rounded investing philosophy has to consider possible challenges and risks.  The real estate industry is fraught with them. Market fluctuations and changes in housing policies provide an uncertain environment for investors. However, you can still make the right decisions by simply analyzing the risks. I prefer multi-family properties mostly because they offer fewer risks than single-family homes. If you own a single-family home and a family decides to move out, you are left with a 100 percent vacancy, which means you will have to shoulder all the expenses of the property. Conversely, multi-family properties are more promising. If you have at least 100 units in your inventory and four decided to vacate, you still have 96 units that will keep your cash flow healthy as well as share in the expenses for the mortgage and all other things.

 Find your place

In this sense, it’s important to find a location where you can invest in and get the best possible returns. For me, I focused my resources on emerging markets. These are basically cities where a lot of development is taking place. There is positive job growth, a tight inventory for multi-family homes, stable industries, the availability of basic services such as healthcare and safety, and the existence of large corporations. I would also look into the availability of transport terminals (airports, for example), infrastructure and other utilities. For the population, I put more focus on cities with a population of more than 100,000 people. These are good indicators of emerging markets. Evidently, these markets form a large part of my philosophy, enabling me to secure massive growth in a few years’ time.

Know who you want to build relationships with

Another important tip to building your investing philosophy is to know the type of people you want to work with. Having a nice contact list of brokers, realtors, buyers, and sellers gives an added advantage, especially when you opt to expand your investments outside the local market. For this, you need to create an effective plan for enhancing your reputation in the real estate industry. It’s crucial in this sense to know how you are going to build your network so you can enhance your visibility in the industry. All it takes is education. Absorb everything there is to know about your niche before you start engaging the important players.

I hope you are well on your way towards becoming a rock star real estate investor. Use the tips I gave you and build a solid foundation for your venture.

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Vinney Chopra