Which is what a great many real estate investors refer to as staying below your "Threshold of Insomnia".
There could be several things that may cause you to lose sleep.
One is over-borrowing; and the others are making a poor analysis of the market place and the property itself.
Allow me to share 6 Tips about What to DO...
- At all times have sufficient cash reserves, to be able to cover a number of months' loan payments -- just in case you were to lose a tenant, or the tenant is simply late in paying for some reason.
And keep a sharp eye on smaller items like any machinery and maintenance bills, which can quickly add up. - Make certain you possess an investment plan you're happy with, and then stick to it.
Put simply, set reasonable goals and pursue them.
More goals have been missed as a result of lack of planning, than through the strategy itself failing. - Buy yourself a financial calculator, or access to an excellent software program.
And learn to use it to generate a realistic projected cashflow, on an after-tax basis. - Definitely keep yourself up-to-date with various trends within the marketplace.
Make sure you monitor the news and legislation affecting property; undertake courses; attend workshops; and read books on Commercial property.
Knowledge will reduce your risks, and improve your profits. - Identify and engage a top-notch team of Professionals (real estate, legal, financial, building, etc).
The money you pay these people will be more than returned to you, because of the deals they can assist you to put together. - Wherever practical make sure your mortgages don't require that you provide a personal guarantee.
Always endeavor to make them non-recourse mortgages.
- Do not be influenced to commit a large proportion of your capital into risky opportunities.
They may appear fascinating as you go in, however they are often distressing on the way out. - Never do transactions on a handshake -- at all times put them in writing, for your own protection.
- Stay away from getting into joint ventures, without taking detailed advice from your advisors.
- By no means commit money from the sale of one property to invest in yet another, UNTIL settlement on the initial one occurs.
Too many "certain deals" have a weird practice of coming unstuck. - Steer clear of loans with varying payments.
You will discover way too many elements beyond your control, such as a sudden surge in interest levels.
Preferably, opt for a fixed- rate loan.
Although at worst, have a 50/50 split between a fixed-rate and variable-rate mortgage. - Avoid properties which may have substantial negative cash flows (where by your expenses considerably go above the revenue from your property).
The return on money might be higher; but you can leave yourself somewhat exposed -- much like share traders discovered, with their margin calls.
Just simply settle for neutral gearing; and then maximise your depreciation benefits.