Real estate investing is one of the most lucrative ways to make money in America. Although lucrative, it can also be very detrimental at the same time.

I've seen individuals make a profit of over $100,000 in a single transaction. I've also witnessed an individual that had 12 properties that all went into foreclosure.

With everything, there is an upside, as well as a down side.

I have discovered three keys that will assist you to stay on the upside of any investment involving real estate.

Education doesn't cost, it pays.

Due to the nature and difficulty level of real estate, I recommend that you educate yourself about real estate before jump in.

If you were going become a surgeon, would you start operating on a patient right away, before you even knew causes and effects of his/her situation?

With real estate, there is well over  30 different strategies and the more you grasp, the more you will profit.

You don't have to know all of the before you get started, that's why you require the second key...

Surround yourself with successful people.

Henry Ford wasn't the brightest person in the world when he started the Ford Motor company in the 1920's.

Henry knew that if he surrounded himself with people that were smarter, that he could create his vision of the automobile. He proved it over and over again. 

Find a community of investors or a mentor to assist you with your investing.

Successful investors  want to see and assist others to succeed. 

So if you have a particular deal that you are working on, you can run it by someone who has experience.

Be careful who you take advice from though. Make sure that the person is qualified to give advice on that particular deal.

You can even run it by multiple people. It's better to get approval from an expert to do a deal , rather take on a deal and lose your shirt.

Cash Flow is key.

In any business... in any investment, cash flow is an absolute must.

Cash flow is money above and beyond your expenses. Without it you will sink very fast.

If you study any successful real estate investor, you will find that they have some sort of cash producing business.

If you study the reasons why most investors fail, it is due to the lack of cash flow.

I will explain this in a couple of ways...

·         Joe buys an investment property and his exit strategy is to hold it and rent it out. In this particular instance, Joe has a business that generates extra cash every month so that he can afford to pay the mortgage if the property becomes vacant for any reason.

If Joe doesn't have the cash producing business, Joe is hanging himself out to dry because now if for any reason the tenant is not paying or no longer exists, Joe can not afford the mortgage. Joe will lose the property.

I have witnessed this too many times. One of the main reasons that the foreclosure rate is so high right now is because want-to-be investors were gambling on equity. Equity is great, but it is not always liquid.

·         Tom finds a deal that he can't pass up. He has $50K in his retirement and he finds a fix & flip for sale for $35K. Tom doesn't have any extra cash flow coming in and he buys the property. He gets renovation almost complete and runs out of money. It's been for sale since he started the renovations and had no bites. Tom is hanging on by a string at this point, and with all that is happening, is starting to slip on his own bills.

Again, I see this all too often. If Tom had a cash flowing business, then he wouldn't have the problems that he is having.

The three keys for effective real estate investing are:

·         Education

·         Mentors

·         Cashflow

If you want to insure a healthy investing career, you will make sure that you have all three.