I’ve watched enough folks lose their shirt — and their Sunday dinner — to say this with some confidence: Real estate is a game where the sharp make money when they buy, and the dull get educated when they sell.
The stories are always the same — someone bought a dream, ignored the plumbing, forgot to check the neighbors, and ended up living next to a howling dog and a meth lab. So I wrote down a few rules — not from a textbook, but from the good old School of Hard Knocks — to keep you from mistaking a money pit for a mansion.
In real estate, as in life, the worst mistake you can make is believing the painted porch without checking what’s rotting underneath. Buy with your eyes open, your calculator loaded, and your common sense engaged. Because if there’s one thing the old-timers and the savvy investors agree on, it’s this:
You make your money when you buy.
And if that offends your instincts or your ego — well, maybe you’re just not ready to play the game. Because this ain’t Monopoly. This is real life. And the bank doesn’t give you $200 for passing Go — it charges you interest and sends you a bill for lawn care.
Rule #1: You make your money when you buy.
Profit isn’t just made when you sell — it’s locked in the day you close. A good deal upfront gives you equity, options, and peace of mind down the road.
REMEMBER: You make your money when you buy – repeat it after every rule.
Rule #2: Your home is not an investment property.
It’s your primary residence. It’s where you live, raise your family, and build your life. It’ll cost you money, but that’s the price of not paying rent and building roots. Don’t confuse it with cash-flow property.
Rule #3: Location, Location, Location — Past, Present, and Future.
Where it’s been, where it is now, and where it’s going. A good location holds value and attracts growth. Think long-term: schools, jobs, transit, development plans. I typically spend days hanging around the neighborhood of a house I’m considering. I visit the grocery store, fast food joints, the nearest gas station, and talk to neighbors. Find out everything… BEFORE you BUY!
Rule #4: The 1% Rule.
Want a quick way to judge an investment property? Multiply the price by 1%. If the house is $300K, it should rent for around $3,000/month. Can it? If not, dig deeper — the math may not work. Walk away!
Rule #5: Cash Flow.
Figure out your costs — mortgage, taxes, insurance — then add a cushion for maintenance. Now figure out your rent and income. You want positive cash flow. If you can’t get it, why do you want the property?
Rule #6: Know your numbers before you buy.
I’m surprised how many times I ask someone who just bought or is buying a house and they don’t know their property tax, insurance cost, or even their mortgage numbers. If the numbers do not work….Run away.
Rule #7: Fix the problems first, then do cosmetics.
Don’t remodel the kitchen and then discover you have to tear it out to fix the plumbing. Make a budget of needed repairs before you buy. Use your inspectors not just to find problems but also to negotiate your price down. If the numbers and budget can’t work… What do you do? Walk away.
Rule #8: Know your buyer before you buy or remodel.
Figure out who might want to buy your house — the price range, the location, and their needs. That should guide your remodeling choices. Don’t put a $50,000 kitchen in a $300,000 home or a $10,000 one in a million-dollar home.
Rule #9: Interest rates don’t matter if you buy cheap enough.
If you buy a $300K home for $200K, do you really care if the interest is 10%?
Rule #10: Don’t buy someone else’s dog with fleas.
Always talk to the seller and find out why they’re selling. I like buying from older people moving out — they cared for their property and might give you a better deal if they like you. If someone is selling because they gave up on tenants or remodeling, there could be hidden issues. Maybe they’re a flipper who overpaid, or worse — maybe the house has skeletons in the basement. If they are running away from their house, you should too.
🔧 EXTRA CREDIT
Your price, my terms… Your terms, my price.
If I’m negotiating with you and you want full price, I’ll negotiate on time, expenses, points, inspection terms — even ask you to carry the paper on part of the mortgage.
If you want quick terms for cash, I know something’s wrong with the seller or the property — and I’ll start 30% below asking. If not …. I WALK AWAY.
**You make your money when you buy.
Wimps need not apply **
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