I think it’s fair to say to that most people want to be the best they can be at their job. Whether they’re a steelworker or bus driver or a real estate investor, performing the job well is good for everyone involved. If you’re a new investor, however, you may be wondering exactly what a “job well done” entails. Obviously, making money off a deal is indicative of this, but there are other factors, too, like personal satisfaction and the amount of time you’re spending on investments (i.e., if all your waking hours are devoted to one transaction for a long period of time, you may need to make some adjustments).
To be the best investor you can be, there are lots of things you can do. And I mean LOTS. Everything from working with a great real estate agent to taking time to meditate can be helpful. For the purposes of this post, however, I’ve narrowed it down to 4 factors that I feel are most beneficial in helping people make the most of their investments.
Take advantage of tax benefits
If you’re not aware of some of the amazing tax advantages that real estate investment offers, you need to study up. You can save literally thousands of dollars through these benefits, and all it takes on your end is a bit of strategizing. Some of the more commonly known benefits include depreciation and mortgage interest deductions, but there are other ways to save, too. Buying properties through a self-directed IRA is one method, or using a 1031 exchange when selling an investment is another way to save big. Get online and do some research, or talk to an accountant to find out other ways you can save on taxes.
Pay down debt
Debt is nobody’s friend. Even though there is an argument to be made about how certain types of debt, like a mortgage, can be used for leveraging more investments, it’s still a good idea to pay down debt where you can. The less debt you have, the more buying power you have, as creditors will look more favorably on you when you do need to borrow.
Have an emergency account
Along the same lines as paying off debt, having an emergency account dedicated solely to your investment property is important. With an emergency account, you have a nice cushion to fall back on when things go awry. Instead of panicking about where you’ll get the money to make a major repair or deal with a vacancy, you’ll be afforded enough protection to handle the situation without having to dip into other funds or borrow money. I recommend putting a certain percentage of your income each month into the account, until you’ve reached a minimum that you’re comfortable with. Once you’ve got that base, you can focus on paying down debt and replenishing the emergency account when necessary.
Be disciplined and don’t be afraid to say no!
Being the best means being disciplined. Across the board, every successful investor I know is extremely disciplined. They know how to be patient, they put the time and research in to make smart decisions, and they know when to say no. Their approach to investing is one of control and logic, with emotions kept in check and no impulse decision-making. I’m not suggesting that you avoid all risks, because trust me, some risks are worth taking. But I am saying that you work to be focused, motivated, and in control of you situation. If you’re not, you’re more likely to make poor choices and therefore bad investments.