by Theresa Bradley-Banta
Real estate investing is a thrill a minute. No kidding—there’s always something new. Sometimes you’ll make big mistakes and learn your lessons the hard way—mistakes you’ll never repeat again.
But you will avoid mistakes if you are proactive in your real estate investing and practice the habits of successful real estate investors. You can make smart decisions about how you’ll invest in real estate before you invest.
Here are some of those things you can be smart about.
6 Habits of Successful Real Estate Investors
1. Make Money “On the Buy”
When you invest in a rental property that you can immediately sell for a profit, you’ve made money the day you close. On paper anyway—of course you actually have to sell it to make real money.
The idea is to negotiate a decent deal. Don’t overpay for the property. Don’t buy the first property you see—there are plenty of good investment properties available.
This strategy helps you rely less on forces outside of your control such as market appreciation or the economy. A good solid real estate investment is one where you buy at a negotiated price and then create added value through
- smart management
- appropriate upgrades and renovations
- a good team and
- a solid operations plan.
2. Have Solid Investment Exit Strategies
What are your plans for your property once you own it?
Will you hold it until retirement? Fix it up and sell it? Refinance the property, take some cash out and invest the proceeds into more real estate? Convert the property to another use?
These are your exit strategies. When you have solid investment exit strategies you have a better idea of how you will operate the property today.
Let’s say you want to keep the property as rental for now and convert it to a condominium when the condo market improves. Do you see how this decision will inform your renovation decisions? You might do very little renovating today (enough to attract good renters) and then do a high-end renovation (meeting the expectations of a condo buyer) at a later date.
3. Work On Your Business Not In It
This is where having a great team is critical.
Look at real estate investing as a business. Your job is to manage your business assets and to carry out strategies that grow your investment portfolio. That’s hard to do when you’re micro managing your property or doing small maintenance jobs every day.
You don’t want to lose sight of your long-range plans or compromise your ability to consistently carry out your plans.
What tasks or jobs will you farm out? Does it make sense to hire a small jobs contractor to handle the maintenance while you get out in the market looking for your next investment property? The answer is “Yes!”
It’s easy to fall into the “I’ll just do it myself” trap–especially if you have the know-how.
4. Start Networking
Networking is the best way to expand your horizons especially if you’re building a real estate investing business. Through networking you will:
- Meet and learn from other successful real estate investors (mentors)
- Discover new markets
- Find new contractors and service providers through referrals
- Continue your education
- Find investing deals that the public has no access to
Who do your friends and acquaintances know? I’ll bet you can get warm referrals to successful investors by making a few phones calls. Don’t underestimate the value of building your network.
5. Keep Happy Partners
This almost seems like a no brainer, doesn’t it? If you have partners in your deals you know that you want to keep them happy. Right?
Well . . . there’s a fine line between happy, content investors and those investors who want to run your business for you. It’s not unusual to have investment partners who have zero experience in real estate investing.
Do you really want your partners micro managing your business?
Make your partnership structure clear from day one. For example, at the early stages of the investment process:
- Answer any and all questions about the property and the financials.
- Offer a tour of the investment property.
- Offer to let your team (such as your property managers) meet your partners in a short introductory telephone call.
- Promise (and keep your promise) to send quarterly updates on everything that’s happened with the investment over the past quarter.
- Hold an annual in-person meeting (a requirement of some partnership agreements).
- Outline the role of all participants in your partnership agreement.
When you set up the groundwork and terms of your partnership at the beginning of your partnership most partners are happy to comply—with very little interference.
6. Buy on Facts, Not Emotion
Intuition and feelings have no place in real estate investing. Unless the property you’re buying will be your personal, primary residence don’t fall in love with the property. At least wait until you’ve owned it for a while and it’s earned your love.
Think about your first crush. Were you looking for faults and flaws at the time? No! You were head over heels, blindly, madly in love.
Have you heard the expression, “Love is blind?”
You must kick the tires and look under the hood of any investment property you’re thinking about buying. Run the numbers. Bring in the property inspectors. Know your rental market.
You’re already showing your investing smarts by reading this article. Keep it up. Read everything you can get your hands on. Pick up the phone and start networking.
You can even call me. Just send me a quick message via my contact page and we’ll set it up!