33 Guidelines for investing in real estate.................

Guideline #3:  The money is made when you buy.

You make your money when you buy.  It takes hard work, discipline, and time to consistently earn money as an investor.  If you overpay for an asset, it just makes it that much harder and takes way more time to earn a return on investment.  These are investments we are making, they are not trophies to acquire.  When sellers are asking too much for their property, the wise thing to do is to let them continue to own it.  Husband your resources until the right investment can be acquired.  Buying at cap rates below 8% is to be avoided at all costs.

Editor's Note:  Many smart people have been spending real money at cap rates well below 8%.  Either they know something I don't - which is very likely - or they  care a lot about the return ON their capital, not not so much about the return OF their capital.  Many smart people believe that the current low interest rate environment helps buyers because it makes borrowed money cheaper.  I believe low rates favor sellers.  Cheap money  is a trap that causes buyers to overpay.  Let's wait and see what happens to all those investors who purchased property at a 6% cap rate when interest rates rise to 8%.

Another Editor's Note:  For this blogger's take on cap rates go here, here, here, or here.