The biggest goal in real estate investing is to stay in the green. The best way to do it is to make wise property choices and safe deals. Real estate is an industry where rules and strategies are tossed about a lot. Some of them are useful; others are nonsense. However, there really are a few core rules that can consistently deliver results. With these seven strategies in your toolbox, you will be able to make the right property choices, identify the safest investments, and meet or exceed your short and long-term investment goals.
1) Buy When Money Can Be Made
If you want to gamble go to Vegas. If you want to be successful in real estate don’t speculate. Regular property buyers buy because of emotion, investors do not. Speculation is tempting, but there is no reason to take unnecessary risks.
In order to make money when buying real estate, you need to be impartial when estimating possible returns. Err on the side of caution when calculating the likelihood a deal will produce. Good buying strategies are:
- Buying below value
- Purchasing properties that already have a stream of rental income
- Arranging an end buyer prior to closing a deal
2) Forever Be A Student
When you don’t or won’t learn, you will lose. The key to being a leader is embracing lifelong learning. If you look at key players in the real estate market, you will see they are always learning and evolving their strategies accordingly. Doing so increases your longevity in the market.
There will always be more you can learn about real estate investing. The trends of the industry fluctuate regularly, Make keeping up to date with those trends part of your daily schedule, weekly achievement list, monthly goals, and yearly plan.
3) Have Long-Term Focus
When making choices about buying real estate or selling real estate you should be driven by a long-term plan. Big plans are good, but understanding how they will play out over time is better. Almost anyone can make a few real estate deals, it is even possible to bank significant profit early on. However few people manage to successfully stay the course long-term and build wealth.
Time moves quickly. Back up your five-year plan with a ten-year plan, and have a clear picture of what 20 and 30 years will bring. If this sounds incredible, consider that the average homeowner has a 20 to 30-year mortgage. How much more unreasonable is it for the average investor to be clear on their investment goals for a similar amount of time?
4) Supply And Demand Are King
Everything about real estate is driven by supply and demand. Your goal should be to pinpoint markets with demand and then move in to take control of part of the supply. However do not get comfortable because the demographics of supply and demand are always changing. That said, there are some consistencies in particular markets. You need to be familiar with it all.
Keep in mind branding can create a demand. If you have a brand people associate with what they want, you can control what people demand. On a large scale, Warren Buffet and Donald Trump have accomplished this. On a smaller scale, local investors, property management companies, and real estate companies do the same. Familiarity is a good positioner for success.
5) Be Micro vs. Macro Focused
The national news is not a good source for your real estate investment information. You will get lost if you use such a widely focused lens. Rather hone in on the local level. Better still, focus your individual investment opportunity and its immediate area. This takes nerves of steel, because you have to drown out the background noise.
That said, there is no need to completely ignore the bigger picture. You can widely assimilate information such as trends and market data, but then zoom in and pick the best investment deals specific to your market. It is possible for the market to overarchingly lean in one direction, but for the local climate to be completely different.
6) Plan For The Worst
When you are buying real estate, selling real estate, or for financing real estate, it is not wise to have a glass half full mentality. You need to be ready for the unexpected. Your projections cannot be best-case scenarios. The worst thing that can happen is that you are unprepared for an unforeseen hiccup.
Have the expectation that your closing costs will be higher than projected. Plan for your repairs to go over budget. Assume your marketing results will take longer. Realize that the other players involved may be totally unreliable. Then make contingencies. Best case everything will go off without a hitch, worse case, you are ready if they don’t.
7) Don’t Be Neurotic About Control
Take a deep breath, relax, and accept you cannot control everything. However, you can still seek to control as much as you can. Aim big, seek to position yourself to have influence, a significant and controlling vote, and loyalty within your market. Familiarize yourself with the local real estate cycles and numbers. Prepare for whatever the market might cough up.
When you run into something that is not in your control, don’t panic. Instead, realize that the unexpected can still yield results that will benefit you. You may not be able to control Mother Nature, but you can have an action plan for weather and natural disasters. The market is going to do what it will, but you can have a strategy for how to capitalize on the changes as they come.
Those are the seven golden rules of real estate investing. If you are interested in more tips, guidance, and support to help you develop or grow your real estate business, we are here to help! One of our experienced coaches is available to speak with you about your vision, concerns, answer questions, and give you tools to aid in your success. Please contact us today for a no-cost 30-minute coaching session.