Looking for an investor secret that could change the game?
More and more people are getting into real estate every year. But, unfortunately, not everyone will find success in this highly competitive industry. Newbie investors in particular have a hard time navigating their way through beginner investing. They often make destructive mistakes that end up drastically reducing their chances of success in real estate investing before they even round out their first year.
So, what are our top investor secrets? Some of the most common mistakes we often see include investing in property without having a proper plan, trying to find shortcuts, and not doing your homework.
But achieving success in real estate investing isn’t as hard as you might think. You just need to follow a few rules to help you find your way through the industry.
In this post, we’ll cover 6 tips every investor needs to understand to succeed.
Let’s dive in.
The ability to tell the truth is essentially developing a clear understanding of where you currently are and where you want to be. You need to understand your current cash position, debt position, and real estate market knowledge. Being 100% honest with yourself is essential to know just how much work needs to be put in.
To find a clear path to success, you need to know why you’re investing and what to expect of your money. Without that, you’ll end up directionless and potentially marooned in the wide open sea that is real estate investing. Some common objectives are capital preservation, capital appreciation, speculation, income, and an appreciation portfolio, which will be a lot different than a preservation portfolio.
If you don’t know what you’re looking for, you’ll almost always end up disappointed with your investment. So, working through a baseline assessment helps people estimate where they might mess up and improve future investments.
Having a vision of where you want to go is crucial in finding success as an investor. After all, how can you get where you’re going if you don’t quite know where that is? Direction, even just a general one, will help you develop strategies to attain your goals. You need at least a vision of where you want to be in a year, like perhaps owning 10 rental properties or successfully selling two problem properties. That vision will act as a guideline and keep you accountable for your goals.
While you might not have the right resources to achieve your goal right now, throughout the year, you still need to plan and strategize to make success possible. In many cases, despite having a vision, people don’t follow through with actions due to a lack of accountability. A great way to hold yourself accountable is by telling others about your goals so that they can help keep you on track.
Having annual targets is important, but sometimes these massive goals can become overwhelming. Setting lofty goals without any plans can feel like you’re trying to run a marathon for the first time without training up beforehand – you’re setting yourself up for failure. So, the trick is to divide your goals into small chunks that are attainable but still play a vital role in the grand scheme of things. Try quarterly or even monthly goals that will help chip away at your master goals.
Smaller goals are easier to reach, so you’ll be motivated to keep going whenever you hit a target. For example, you can use the first quarter to learn about everything. Try reading books, watching videos, attending as many meetings as possible, and reaching out to investor agents and real estate groups. When the next quarter rolls around, perhaps you’ll be ready to start actually investing. The key is strategic, manageable chunks.
A common investment trick is to diversify one’s assets. Markets are prone to fluctuations, and different markets perform differently at any given time. Having a variety of assets ensures that you have income flowing even if a specific market is going down. This essentially works as a risk mitigator.
Putting all of your eggs in one basket is always a terrible idea. So, it’s standard practice to avoid putting all your money into one investment. Instead, spread out your investments, whether you back diverse companies or real estate properties in different states. By diversifying, you spread your risk across multiple sectors and increase your odds of success.
Then, if something goes south and affects a certain industry, the impact will only hit a portion of your investments. So, rather than losing everything, you experience a dampened blow.
Before investing in real estate, the most crucial thing to consider is understanding the future development potential of the area. Whether or not the market you want to invest in is lacking in one way or another doesn’t necessarily matter.
What matters is how the property or neighborhood will look in a few years. In other words, you can buy a property that isn’t at its best but has potential at a good price. Then, as it develops over a few years, you can expect to sell it at a profit.
A good way to assess your expectation is by checking the city’s future progress plans. You should also keep an eye on local schools, hospitals, shopping malls, banks, and restaurants. Set for the area’s short- to medium-term growth, that’ll give you the best return on your investment.
Real estate gets more valuable as the area or the city it’s in gets more developed and offers a better quality of life to its residents. Surveying the surrounding neighborhoods is a good way to estimate the future development of that area.
The most crucial thing you need to master in order to become a successful investor is scaling your business. The main question here isn’t “how?” – it’s “who?” Most people look for a tactical expansion strategy instead of focusing on the simplest and most effective way to scale their business, which is team building. Leveraging other people’s knowledge, expertise, and skill is the key to take your business to the next level.
After all, you can’t do everything on your own. A strong team isn’t just good to have, it’s necessary. You need to handpick the key individuals that can help you attain your goals and bring out the company’s full potential.
Identifying who is the best fit for your team is highly important. You’re an investor, which means that you don’t necessarily need to be good at all the technical or nitty-gritty parts of real estate. Instead, you need to be good at finding and hiring people who are good at those. Knowing when and how to build a team is the most important skill you need to have as a real estate investor, especially when scaling your business.
Investing in real estate often seems like easy money from the outside. But it can be quite challenging, especially if you don’t know what you’re doing. The truth is, it takes much more than money to succeed in this industry. You need proper plans, a solid strategy, and a killer team.
The good news is that If you follow the steps mentioned above, your chances of success as an investor go way up. We’ve seen it firsthand.
Whether you’re purchasing one investment home or one hundred, you don’t have to go it alone.
If you’re ready to buy your first (or next) investment property, here are 3 steps to get started today:
McKenna is an Evernest Content Strategist based in Denver, Colorado. Her expertise spans the real estate and home financing sectors. When not writing, she enjoys picnics, yoga, and antiquing.