You Make Your Money When You...
If you want to sound like you’re in the know, you could say…
“You make your money in real estate when you buy, not when you sell!”
It’s a phrase that gets thrown around in the biz, if you will.
But sounding like you’re in the know won’t do you nearly as much good as actually knowing that it’s kind of true...but not entirely true.
OK, yes, you make your money when you buy the property in the sense that it’s how and when you can control the value. You are the buyer at that point. So you are either getting a good deal or not. Once you own the property and you go to sell it, the buyers you’re trying to sell the property to decide what it will sell for. You can only sell a property for as much as the market will bear. Not a penny more.
So, obviously, it’s important to get the best deal you can when you buy…
However, that’s a bit too simplistic when it comes to investing, Because you also make your money (or lose it) at other times and in other ways as an investor, such as:
By keeping the terms of borrowed money as low as possible.
By doing the renovations on a flip in as quick a timeframe as possible.
By keeping the cost of renovations as low as possible.
By obtaining the highest rents possible, if you buy a rental, and keeping the vacancy rates as low as possible.
By having solid tenants who pay their rent always and on time on a rental property.
By selling the property for as much as possible, as quickly as possible, when you do sell. (Holding on for too long or for too much money is a huge reason many investors lose money.)
So as much as you should try and get the best deal possible right out of the gate by buying the best possible property at the best possible price, don’t lose sight of the fact that you are either making yourself money or losing money at every stage of your investment.