5 Things Every Real Estate Investor Needs to Know How to Do
You know that book, The 7 Habits of Highly Effective People? It was a huge bestseller when it came out in the late 80s, and it continues to be popular today. Some of the habits listed in the book include things like being proactive, discovering the strengths in others and using them to your advantage, and creating a balanced lifestyle for yourself.
What does this have to do with real estate investing, you ask? A lot, actually. Each of the habits detailed in the book applies to modern-day investors, and this got me thinking. What are some other things that investors should be doing to be the best they can be? What sort of actions are the amazing investors taking that set them apart from the mediocre ones?
After much thought, I’ve come up with 5 things that every investor needs to know how to do if they want to be successful.
- Evaluate potential deals. This lies at the foundation of sound decision-making when it comes to property investment. If you don’t how to evaluate a new market, neighborhood, or the property itself to determine its profitability, then you’re setting yourself up for failure. Every amazing investor knows exactly what to look for with a potential new deal: growing market, steady neighborhood with decent schools and low crime, large tenant pool with quality renters, fair price, etc. They also know how to run the necessary calculations to see if purchasing the property will be a profitable move. Without these evaluation skills, you’ll be lost.
- Communicate effectively. Knowing how to communicate with others is another critical piece of the success puzzle. Investors talk to hundreds of different people, and maybe even more, over the course of their career. Agents, lenders, contractors, other investors, sellers, property managers – you’ll likely interact with them and plenty of others as you continue on this journey. Knowing how to talk to each of them – and, more importantly, when to listen – can make all the difference between success and failure. Be genuine, get to know your audience, and always maintain good will.
- Make projections for the future. You also must know how to get a good read on a place and be able to make educated predictions on how it will perform years down the road. Unless you’re flipping houses, you’re probably in this deal for the long-haul (i.e., years of ownership). It’s really important that you’re able to look at a place, see what’s going on in the area, and make a solid guess as to what it will be like in the future. You can research community trends and plans for future development to help give you an idea.
- Secure alternative forms of financing. Most of the investors I know didn’t start out with thousands of dollars, just waiting for that perfect property to come around. They had to get financing for their investment, and many of them had to be creative in their methods. My point is, it pays to know how to secure financing, and not just through conventional methods, like getting a mortgage from a bank. Building a network of potential lenders, whether it’s through a bank, credit union or a hard money lender, is one of the best things you can do for yourself as an investor.
- Practice patience. Impulsiveness and investing do not belong together. If you are prone to rash decision-making, it’s imperative that you start practicing patience ASAP. Every investment decision you make should be carefully thought-out and planned, even if you’re in a time crunch to make a choice. Of course, this means that sometimes you may miss out on the deal, but take comfort in the fact that your patience and diligence will save you from bad deals, too.
Don’t settle for mediocrity. Use the advice above to help you help you reach your true potential and become an amazing investor!