There are several different characteristics that can transform a good real estate investor into a great investor. Likewise, there are a variety of features that differentiate certain real estate markets to the top of every investor’s list. Let’s first start with the investor. What does it take to become a “successful” player in the real estate world? Well, the three characteristics that our team came up with was having a developed investment plan, knowing the market you are investing in, and forming a business network that can help you grow. You don’t have to believe us… A study from Investopedia reported that the number 1 habit for “Successful Real Estate Investors” is creating a solid business plan. Why does this matter? Without having a business plan or knowing the market, an investor will struggle because real estate investing is not always easy and it is often very competitive. Nearly all real estate investors are different and have different goals, but our team focused on some of the top features that can transform your real estate career.
The Weight of a Great Investment Plan
“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” – Abraham Lincoln
Give a real estate investor six hours to buy a home and they should spend the first four creating and analyzing their investment plan. It may not be the same words as what “Honest Abe” said when talking about preparation, but both highlight the significance of planning. Whether the goals of the plan are long term in owning 30 doors before you retire or short term objectives that may involve understanding how to run house comps in your area, the goals in your business plan are the foundation for investing. Without organization and laying out your strategy, it will be hard to do the day to day activities that come with investing in real estate.
Some parts of the business plan that our team encourages investors to think about and not look over include:
-Identifying the major risks associated with your investing and understand how to avoid them
-Creating a deal criteria sheet that can quickly analyze the property- You do not want to miss out on a unit because you took too much time running the numbers
-Having systems/software in place that find desirable properties for you
-Finally… Outline smaller plans like renovation/rehab process or timelines and having contractors in your network before finding the properties
Understanding the Market
Residential versus commercial, single-family versus multi-family, Midwest versus West Coast. The list goes on and on with different market features and investment opportunities. While there is overlap in varying Real Estate Markets, it is critical for you as an investor to have extensive insight on the market you are investing in. If you do not know the market, then consider hiring local expertise with specific market knowledge and experience. For example, our company has clients from different geographic regions that rely on our internal market knowledge to help grow their investment portfolio. Besides hiring local expertise, other ways to learn the market can be done with other resources like podcasts, books, license courses, and blogs. Our team has a few suggestions on investing books and podcasts:
You are Only as Good as your Team
If you read one of our previous blogs (The Power of a Coffee Shop) then you know the importance of networking and forming connections in real estate. Whether it be in a coffee shop or on a website forum done from your home office, having people around you can guide your investing success. Not only does forming a dependable team help with finding vendors, contractors, or buyers, it can lead to more deals and referrals. Why do hours of research on a certain renovation project when you have an experienced contractor in your network that specializes in that area of home rehab? Why spend more money on direct mailers or going through the MLS when you have a partner that can find off-market deals that meet your investment needs? There are so many more examples that we could share, but I think you now understand the benefit of team members.
Like a great team in any sport, you need teammates with diverse and unique skills. Maybe you do not need that lender to help finance your next deal or that roofing crew for your next rehab, but having them in your contact list will never hurt in the future. If you are planning on investing in a market outside of where you live, forming a team is even more crucial. From property management to having an agent for deal finding, the network can open up more doors for your investing career or slam some opportunities in your face.