If I asked you what was in your toolbox, what would you say? A hammer? A drill? If you did, I’d tell you that’s the sort of stuff that’s in your contractor’s toolbox, not yours. That’s because your toolbox, as an investor, is full of non-traditional tools. Your toolbox contains all the stuff that you use on a day-to-day basis to help you find properties, invest in them, and manage them after purchase. These are your tools, and here are 5 of them that you absolutely need to know how to use:
Every investment success story includes a strong educational foundation. I’m not talking about having a college degree, either. In fact, I know several self-taught investors who are high school dropouts who are doing just fine. The education that I’m referring to is the kind you pursue yourself. It comes from books, online articles, conversations with other investors, seminars, and workshops, and most importantly, experience. Before you start investing in real estate, it’s your job to amass as much as you can about every step of the process. But even after you’ve acquired property, your education must continue if you want to be successful. This is an evolving industry that requires you to seek out new information and learn continually if you want to grow.
A Strong Network
The next item in your toolbox is your network. A strong networks includes all types of people connected to your business – and likely even some who aren’t. This may be other investors, lenders, contractors, property managers, real estate agents, appraisers, inspectors, family, and friends. All of these folks play a role in your success, and as you develop your network, remember that it’s about give and take. You are there for them as much as they are there for you, and it’s this attitude that will keep your team strong.
Property finders sounds like the title of a new show on HGTV, but what I’m referring to here are the tools that you use to locate new investments. For most of us, the internet is the biggest source. Whether you’re working with a realtor and using their website or visiting sites like Zillow or Craigslist, a computer with internet access is necessary. But there are other methods for finding investment properties, as well. People still put out newspaper ads with property listings, and even just driving around can put a property on your radar that you may not have noticed otherwise. My point is, you need to have several methods of locating great properties at your disposal so that you be assured of connecting with the right one(s).
Once you’ve found a potential investment, the analysis can begin. In order to complete this part thoroughly, you need a variety of analytical tools on hand. Take predictive analytics, for example, which will help you determine all sorts of cool info, like projected cash flow, cash on cash return, expenses, and lots more. Do an internet search for “real estate predictive analytics” to learn more and access these online calculators. Or, if you prefer to do things the old-fashioned way, there’s nothing wrong with opening up a spreadsheet and inputting the data and performing the calculations yourself. So long as you are thoroughly analyzing potential investments, it doesn’t really matter how you do it. And remember, the analysis should continue after purchase, so you can make sure you are staying on track financially.
Finally, there are certain management tools that you should have in your arsenal to ensure smooth sailing post-purchase. If you’re not going to use a property manager (which I do recommend, by the way), then it’s a good idea to use some type of landlord software or an online platform to handle things like tenant screening and rent collection. This will streamline the process and help you stay better organized. And speaking of organization, you should also implement a data storage system where everything pertaining to your property and its tenants is located in one convenient and accessible place. I like Google Drive for this. I create a folder for a particular property, and then subfolders under that for things like maintenance records and receipts, lease documents, tax info, and anything and everything related to the property. It’s free, it’s simple to use, and I know I can find what I need in a matter of minutes.
Those are just a few of the tools you need in your toolbox in order to be a successful real estate investor. Know them, learn to use them, and don’t be afraid to swap out a tool if it’s just not working for you.