Avoiding burnout in investing. As promised here’s the first of four principles I wanted to discuss:

Principle #1: Look before you leap
Many real estate investing courses are just personal motivation seminars with a thin veneer of real estate education. These courses may serve some use if they cause you to take charge of your financial future, but you don’t want to go charging into battle without the right tools. 

In the example I offered the other day the seller’s primary mistake was that he underestimated the amount of effort that it would take to remodel the two properties. He nearly had the work finished by the time I came around, but by them he was tired of spending time and money and was ready to move on to something else. It’s easy to underestimate rehab costs when you’re bidding on a property. Don’t let your optimism lead you down the wrong path. 

When a good deal pops up you’ll often have to act quickly, but even when under a deadline there is still time to conduct a basic economic evaluation. Compare the cash outflow (mortgage plus taxes and expenses) to the cash inflow (rental income) to get an idea whether or not you should expect the property to break even on a month-to-month basis. And things break, so don’t forget to include a reserve fund that should be around 1.5% of the property value per year. The best way to maintain your peace of mind is to invest in properties that offer an adequate return, and this will require you to do your homework.   

Looking before you leap is what EquityScout is all about. We’ll give you the tools that you need to understand the rewards (and risks) before you put that offer in. We’ll talk more about the EquityScout tools in future posts, but for now stay tuned for the second key principle to help avoid investor burnout.