What is THE most important step that you need to do when investing in real estate? It’s something that most people miss!
In today’s bonus episode, Dan is going to break down how to set your investing objectives, and why it’s so important.
Don’t forget to check out this bonus episode on Youtube!
You don’t want to just follow the flow of people investing in whatever everyone else is. You need to define your investment plan based on YOU! You’ve got to look at the long game first and figure out what is your end goal, and what are you trying to accomplish. Then you can start to pick your investments. So how do you do this?
Find out, in another bonus episode of Multifamily Investing Made Simple!
“This is going to take all the emotion out of it because emotional decisions are bad decisions. And when it comes to investing in real estate, you want to be mechanical.” – Dan Krueger
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The Most Important Step In Real Estate Investing
[00:00:00] Dan: Hey, what’s going on guys. Do you wanna know what the most important step is and investing in real estate? I’m about to tell you.
he was going out, guys. This is Dan Kruger from the Victus capital, and they want to talk to you about. I think, and I believe is the most important step in investing in real estate, really investing anything that most people are skipping, and that is defining your parameters. Defining your objectives is actually the first step.
And we’ve talked about this in our content before, but let’s recap real quick. First thing you need to do is you needed to figure out what it is that you’re trying to accomplish. Okay. So instead of focusing on what the hottest thing is out there, trying to figure out what is the outcome that you’re trying to get to, uh, for some people, it might be early retirement for some people, it might just be supplementing the retirement.
Um, you’ve got to look at the long game first and figure out what is the end goal that I’m trying to [00:01:00] accomplish, and then start to pick your investments. Don’t just follow the crowd into what everybody else is doing. So. Some people might think, okay, I may want to just supplement my 401k right. In that case, maybe cashflow is not that important.
Maybe I want to get cashflow now and maybe I want to quit my job tomorrow that cashflow might be a heck of a lot more important. And there’s a whole array of different things that you can be doing out there in real estate. So it’s really important that you find the right fit. So assuming you’ve identified what it is that your objective is, let’s say your objective is to start to accumulate some cash flowing investments.
Uh, but you have a job. So you know, it doesn’t need to support you today or tomorrow, and you want to have some upside potential. You want to see some equity appreciation, um, but you don’t necessarily need to maximize. At the expense of the cash flow. So you’ve identified yourself as somebody who wants cashflow and you want some appreciation.
That’s great. So once you identify that you’ve got to get specific, and this is where you’re going to make your life a heck of a lot easier as you define your investment parameters. These are the [00:02:00] specific metrics that you’re looking at to figure out if a deal is going to meet your needs based on your objective and the best part about this.
This is going to take all the emotion out of it because emotional decisions are bad decisions. And when it comes to investing in. You want to be mechanical. And so you do that by identifying your parameters. So what are some examples of parameters? Uh, they’re typically going to be tied to a lot of the KPIs that you’ll see talked about in, in deal.
Dexy might be looking at this could be cash on cash return. This could be internal rate of return. Average annual return could be equity multiple. Um, these are all examples of. Some key metrics might be that you’re looking at to see what your parameters are. So for the individual, I, uh, I described before somebody who wants some cashflow, but they’re not trying to retire tomorrow, but they also want to see some appreciation because they’ve got a long time horizon and they want to actually grow.
They might be looking at multi-family properties. Like we do it Invictus value, add deals where we’ve got some cashflow on the front end and we’re forcing appreciation to create [00:03:00] value for our investors. So it’s kind of, kind of the middle zone in the investing space. In my opinion, I call it the Goldilocks zone because of.
But for that person, they might say, Hey, I want to see a minimum five or 6% cash on cash return. And I want to basically double my money every five years. So a two X multiple on a five-year hold with a five or 6% average cash on cash return. Maybe those are your parameters so that if you have those identified, when you’re looking at decks and while people are pitching you on places, you can put your money.
You’ll know. In a much more black and white and quantitative way. What meets your parameters? You can kind of see past the marketing and the flash and the pizazz and grant Cardone screaming in your face. You can look at the stuff that matters and see if it’s a good fit for you. And if not go the other direction.
So hope this helps hope. This helps streamline your process of vetting deals and operators. Uh, if you haven’t done. Like subscribe and share everything that’s going on in this channel. There’s going to be a ton of great educational content. So we will see you [00:04:00] guys in the next video.