Is Your Real Estate Investment Strategy Sustainable? | Instant Investor

Cashing in on today?s hot real estate market is smart and can net investors huge amounts of money but unless a sustainable model is being built the money won?t keep flowing?

If your investment strategy isn?t sustainable cash flow could eventually stall. Do you really have a large enough nest egg to support your debt, live on and realize all of your goals without another dime coming in?

4 Ways to Assess the Sustainability of Your Investment Strategy:

1. Is it Scalable?

Is your real estate investment strategy and business model scalable? Can it be grown to invest in or flip more homes without falling apart or become too problematic? Real estate investing must be treated like a business and in any business you are either growing or fading. Do you have systems and a structure which will allow you to easily and profitably do more volume and take on more staff? What if the market gets really ugly, can it be scaled back without going bankrupt? If you have resigned to being a solo investor can you really keep up with the workload for the long term, especially if you try to do more or is it wiser to bring in help and start building a real business now?

2. Are Your Profit Margins Big Enough?

One fatal mistake real estate investors make when the going is good is taking on too much debt and overhead. This applies to both in and outside of their investment businesses. Not only can this be unsustainable if income dips or stalls but it can mean financial ruin for decades, along with a whole world of painful side effects.

Before you take on more debt and liabilities make sure you have the reserves to support it as well as a viable exit strategy which works in the worst case scenario. Leverage can be very advantageous for pole vaulting your income and wealth to the next level, just make sure your pole is solid.

Investors also need to make sure profit margins are substantial enough to be able to withstand slimmer times or face being choked out of business. For example if REO prices keep climber faster than retail home prices can you keep making money with your current model? What about as inflation continues to inflate the cost or labor and doing business? Give yourself more room than you need.

3. Will it Work in Changing Markets?

The conditions may currently be fantastic for investing in real estate, regardless of whether you are focusing on buy and hold or flipping houses but what happens when things change? Everything is constantly influx. Mortgage rates can?t stay this low forever and nor can home prices. There is money to be made in all markets but will your real estate investing strategy work as things change?

4. Will Your Reputation Fuel a Sustainable Business?

Are you really focusing on building a reputation and brand which will yield repeat business and referrals or sacrificing it in exchange for the next few pennies?

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