Some of the best real estate investments provide a steady source of monthly income, while also growing wealth through long-term asset appreciation. Real estate investments, therefore, are rather unique compared to many other investments. Understanding the unique characteristics of real estate investments will help you formulate a profitable strategy to take advantage of these unique features, while also avoiding possible pitfalls inherent in real estate investing.
5 Shared Characteristics of Successful Real Estate Investors
Always expect the unexpected. When you are going into an investment, knowing when to deviate from your “master plan” is vital to your success. In all types of businesses – but in real estate especially – even the most seasoned investors aren’t immune to sudden, unexpected curveballs. What matter is how you respond – how quickly can you pivot and adjust your plan to make sure you stay on track with your goals? Most successful real estate investors approach each opportunity with a contingency plan and range of acceptable outcomes in the instance something changes. While these unexpected changes can be frustrating, those who are willing and able to roll with the punches are much better positioned for success.
Real estate is typically one of the most expensive purchases an investor will make; one poorly managed deal could be catastrophic. Being a successful investor requires a great deal of daily discipline to ensure that the process is managed efficiently and effectively. The best investors approach real estate as a business. As with any business, this starts with making a comprehensive plan that outlines short- and long-term goals and includes actionable and realistic steps to make them a reality. Writing out your plan not only gives you the opportunity to build in your contingencies, but provides a snapshot of the deal from contract to close. In real estate, it is easy to get swept up in the emotional aspect of the home; before closing a deal, it’s essential to make sure the investment makes sense based on hard numbers rather than your gut feeling. “Falling in love” with an investment property doesn’t always lead to a real estate investing mistake, but it can make it more difficult when the reality does not match the fantasy.
Beyond fastidiously vetting potential deals, successful real estate investors also understand and follow the basic principles of money management. Disciplined investors go for quality over quantity – it’s better to pass up nine average deals, where the margin for error seems too narrow, in pursuit of one great one. They understand their limits, and they know when to walk away from a deal if it’s outside their level of experience or capabilities. Many also choose to focus on one niche, such as flipping houses or leasing office spaces, so they can acquire a depth of knowledge in that area that sets them apart from the competition.
Even real estate investors who work alone must know how to work alongside of a variety of third parties. Part of being a successful collaborator is knowing when to bring in outside help. For example, tax laws are incredibly complicated, and mistakes can be extremely costly. Most real estate investors don’t possess adequate knowledge in this area and choose to work with an accountant to make sure they’re employing the most tax-efficient strategies. Communication skills are necessary throughout every step of real estate investing, from negotiating prices, to working with contractors, to dealing with your property management group. Negotiating – figuring out ways to compromise with other stakeholders while feeling like you’re still getting a good deal – isn’t a skill that comes naturally to many people, but it’s one that the most successful investors have cultivated over time. Lastly, many of the top real estate investors have built a network of other investors, whether through a professional association, in an online community, or more informally. It’s important to have a network of like-minded professionals to encourage one another, exchange advice, and provide referrals.
4. Personal Integrity
While there may not be a formal code of ethics in real estate investing, upholding integrity is incredibly important. We mentioned above, this is a people-driven business that requires working with numerous third parties, from real estate agents and brokers, to contractors, to lawyers and accountants. The best businesses are those built from on word-of-mouth and referrals, so maintaining a positive reputation is critical.
Above all, the most successful men and women in real estate are honest. While embellishing the details is not uncommon in this buisness, cultivating a reputation for being open and transparent will pay off in the long run over the duration of your career.
At the end of the day, the one trait that will push you farther, keep you there longer, and pay off in larger dividends is passion. Investing in real estate is not a get-rich-quick scheme; it carries substantial risk, requires a willingness to ride the ups and downs of the market, and takes a commitment to lifelong education. It takes cultivating partnerships, spending days and weeks finding the right opportunities and seeing it blossom and grow. Those most successful are constantly learning more about the business – everything from how factors like interest rates and supply and demand affect real estate prices, to marketing strategies and management skills. To be successful, real estate investors must also follow the market, relevant laws, regulations, terminology, and new technology. Those who lack passion will quickly find real estate investing an unsustainable pursuit; those with passion are more likely to find long-term success.
If you’ve read all this, you obviously have more grit to you than most, they gave up about the 2nd paragraph in. So maybe you’re really serious about expanding your portfolio with real estate, or starting down the path of investing. I’d love the opportunity to sit down and find out about your goals and discuss the path of least resistance and go over what the market is currently doing, and how you can find the investment property of your dreams. As a licensed agent, I can help you navigate the real estate jungle, please feel free to connect with me to schedule a consultation into the local market opportunities.
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