As with any long-term goal, real estate investing can be tedious, difficult, and time-consuming. Here we’ll discuss ten habits for success as a real estate investor. Keep these tips and tricks in mind when you feel discouraged or uncertain. If you implement these habits in your everyday work, you will find that you are more productive and better positioned to achieve your goals.
Habit 1: Write things down
If you’re like most other real estate investors, much of your business is conducted over the phone or in person. You connect with dozens of people throughout each transaction, and even more over the life of holding a property. Sometimes you’re at your desk working, and other times you get calls while you’re driving or out with family. In any event, you’re probably contacted multiple times per day. It’s close to impossible to expect yourself to remember every detail of your business that you discuss over the phone. That is why it’s so crucial to write things down. Keep a notebook handy at all times, use the Notes app on your smartphone, or send yourself text messages and emails – whatever you need to do in order to capture the thoughts and information you’re confronted with on a daily basis.
Let’s say you own a handful of rental properties and you don’t utilize a property management service, so you handle everything on your own. You’re driving to the supermarket and you get a call from one of your tenants that the toilet is leaking, and you promise them you’ll call a plumber to go service the toilet right away. You hang up and see a text message come in from your spouse to remind you that your condo downtown needs new air filters. This reminds you that you need to make your HOA payment on that single-family home by the beach. You pull up at the supermarket and now you’re racking your brain to recall your grocery list – you needed coffee and paper towels, right? No matter – you’ll walk through the store and figure out what you need by scanning the shelves. By the time you get home an hour later, you can’t remember which action item belongs to which home, and you’re overwhelmed with everything you need to do. If you utilized a paper to-do list, an app with the same functionality, or any other method to get ideas out of your head and onto paper (or into your phone), you minimize forgetting important tasks.
Habit 2: Utilize tools
On a related note to Habit #1, it’s a good habit for you to utilize some of the many tools at your disposal. If you don’t already use a software program to manage your investments, it wouldn’t hurt to consider purchasing one. Nowadays, there are hundreds of programs available for purchase online ranging from the modestly-priced to the super-advanced and extremely costly. On the other hand, you could build spreadsheets in Microsoft Excel or similar applications yourself. The main benefit of utilizing a tool of any kind is to be able to have a dashboard of your investments, as well as the ability to delve into property-specific details.
Real estate investment tools and spreadsheets can give you a picture of your overall profitability across all properties you own. For residential investments, these tools calculate important metrics like your return on investment (ROI), tenant turnover, time to collect rent, and many others. Commercial investment tools are generally more advanced and provide insight into annual returns and forecasting into future years, cash-on-cash return, vacancy rates, and expense breakdowns, among other metrics. Any real estate investor should get into the good habit of having a clear picture of his or her investment portfolio. This will help you determine how potential investments in the future would impact your overall portfolio. It can also help you present your investment capabilities to potential partners, investors, and lenders.
Habit 3: Rely on your team
As a real estate investor, you likely work with a multitude of individuals during the course of your business. Most investors build a team comprised of realtors, mortgage brokers, inspectors, contractors, property managers, lawyers, and tax accountants. When you have such a diversified team of highly-specialized people, it’s a luxury to be able to rely on them to handle their aspects of the transaction. Take advantage of the breadth of knowledge available at your disposal and use your team the way you would in sports. It’s nearly impossible to do this all on your own, and your team is in place to help you act effectively.
It is easy to feel overwhelmed when contemplating a potential investment. The upside is so high, and yet the risk is ever-present. This is the time to rely on your team to help you understand all aspects of the transaction at hand. If you have questions, ask them until you are comfortable with the subject under question. Bounce ideas off of your team. Remember that two heads are better than one, and don’t let your pride get in the way of asking for help. It’s crucial for real estate investors to have a team built of experts in their field. That way, you can focus on being an expert in your field – investing.
Habit 4: Trust your judgment
In the era of Big Data and Google, we live in a constant state of access to the world’s information. There is such a thing, however, as analysis paralysis. When you’re constantly presented with so many viable options, it’s hard to take action on any one investment. Don’t let the expanse of knowledge interfere with your own personal judgment. It takes a few years to get a feel for the business, but your confidence as a real estate investor will naturally come with time. Once you develop your sense of self in this industry, you will feel more comfortable relying on judgment to make better business decisions.
There is something to be said for trusting your gut. Let’s say you’re evaluating a potential rental property. The numbers work, but they’re not anything spectacular. They meet your investing thresholds but do little else in the realm of financial benefit. Your licensed real estate agent takes you to see the property in person, and you don’t get a great “vibe” from the neighborhood or the property itself. You can’t quite put a finger on it, but there’s something about the property that’s holding you back from seeing it as a viable investment option. Keep in mind that investment properties stick with you for quite some time. You want to have a baseline level of comfort with any one of your investments. It’s okay to trust your judgment and walk away from a property you’re not totally comfortable with, especially when it’s barely meeting your thresholds for financial viability.
Habit 5: Build a schedule
As a real estate investor, your priorities are often pulled in very different directions. If you’re working on multiple transactions at one time, it can be difficult to keep track of your commitments. This highlights the importance of getting into the habit of building and using a schedule. Just as it is crucial to write things down, it’s just as important to use a calendar and stick to it. You’ll need to keep track of showing appointments for numerous properties, offer deadlines, inspection deadlines, loan commitment dates, and other important timelines outlined in most real estate contracts.
While to-do lists and productivity apps are great for writing out items of high importance and action items, they don’t have a built-in functionality to remind you at a specific date and time of what you need to do or where you need to be. When you build out a schedule of all the important dates related to a transaction, it’s easier for you to adhere to timelines and follow a transaction through its entire lifecycle. It also avoids the dreadful missed deadlines that can sometimes result in lost deposits or missed opportunities to back out of a contract.
In addition to helping you stay on top of contract dates and deadlines, a schedule can help map out your investment initiatives. When building your schedule, incorporate time for you to network, research, and explore new investment opportunities. Add time for you to follow up with your contacts in the field. Include time for yourself, like going to the gym, running errands, and spending time with your family. Because you don’t have a normal 9-to-5 job, you also don’t have the structure that comes along with a corporate job. You most likely work from home, or from anywhere with an internet connection, and you probably don’t have a clear separation between work time and personal time. Build that separation! Include it in your schedule and hold yourself accountable. The time you spend outside of work rejuvenating and refreshing your energy will pay you back tenfold during work hours. Your brain needs a break from real estate, and you can get into the habit of building a schedule that accommodates your life and your business.
Habit 6: ABL – Always Be Learning
There’s a phrase in the sales industry that has stood the test of time: ABC – Always Be Closing. It’s a phrase that reinforces the importance of constantly closing the sale. In the real estate investment realm, it’s a great habit for you to ABL – Always Be Learning. With such a fast-changing industry, and the fact that it’s so local in nature, it’s crucial for the successful real estate investor to get into the habit of constantly learning. There are market trends, industry updates, and local newsletters available at your disposal on the internet for virtually any town in the world.
In additional to market-specific knowledge, it’s a great habit to continue learning about investment methods, loan options, and the foundations of real estate mathematics. A good real estate investor will stay up-to-date and knowledgeable on a wide range of topics in order to serve as a better partner to his or her team and to be comfortable with all aspects of investing. There is a wide array of online courses in all things real estate that are offered for free or very low prices. If you get into the habit of learning something new every day, you will never feel uncomfortable in the sometimes-ambiguous world of real estate investing.
Habit 7: Use your resources wisely
Most people have the misconception that becoming a real estate investor requires a whole lot of your own cash. While it may make sense for you to purchase your first several properties with your own money, you should get into the habit early of using your resources wisely. It probably doesn’t make sense for you to always use your own money to purchase investment properties, especially if your goal is to get involved in multi-family units or commercial transactions that require a large sum of money. Once you have a few profitable properties, you should let those profits speak for themselves. Use your successful investments as leverage to convince a bank lender, private lender, or angel investor to give you funds towards your future investments.
Savvy real estate investors are in the habit of using their resources wisely. They don’t sacrifice their own funds for high-risk investments; they are big fans of using OPM (Other People’s Money). OPM allows you to take on higher-value or higher-risk investments that you normally wouldn’t take on if you had to invest your entire life savings. This is a strategy that many real estate investors use once they have developed experience in a certain investment niche and have networked with people who have the willingness and ability to invest their money.
There are plenty of options for real estate investors who don’t want to use their own money. Hard-money lenders offer large sums of money, but often at prohibitively high interest rates. Bank lenders also offer large sums of money but require lots of documentation and proven investment success. Private individuals like angel investors or business-savvy friends and family may also offer their money, but beware of taking money from people with which you have established relationships. Most people don’t have the same risk threshold as a real estate investor, and they are generally unaware of how long it may take for them to recoup their money. Use OPM wisely, but use the resources at your disposal before you decide to dip into your own pocket.
Habit 8: Don’t put all your eggs in one basket
Many real estate investors choose to specialize in one area of the market, whether that’s residential rentals, wholesales, fixer-uppers, or commercial investments. While there’s nothing wrong with specialization, especially if you have a diversified portfolio within each niche area, it’s always a good habit to diversify your overall portfolio across different market segments. Get into the habit of keeping an open mind when it comes to investment opportunities. Don’t turn away a multi-family unit just because you’re used to buying single-family homes. Try to evaluate the opportunities as they come and be open to new ideas.
This is a habit that can be cultivated over time, and it’s an important quality to build. If your team knows that you’re open to discussing investments outside of the realm you’re traditionally used to, you’d be surprised at how many opportunities are thrown your way. Success comes in many shapes and forms, and other investment avenues may be more profitable than others. A good mix of various investment types will help protect you from the ups and downs of the real estate market and the national economy.
Habit 9: Network, Network, Network
Another good habit of a successful real estate investor is to build a network of like-minded individuals. You may notice that as you amass profitable properties, friends and family who questioned the validity of real estate investing in the past become suddenly interested in the prospect. They may want to invest in real estate themselves, and they’ll look to you for guidance. Once you expand past this circle of family and friends, you should create a habit of networking at all times. Be open to discussing your investment experience with others and answering their questions and addressing their concerns. Most people are ill-informed about the intricacies of real estate investing, and you can help expand their perspective.
Building your network opens you up to potential sources of business. Consider a conversation that you strike up with someone at a social event. You may discover that they are thinking about selling their home but that they don’t want to work with a real estate agent. They are concerned that they’ll be talked into a huge price reduction because of the many improvements their home needs. You, a savvy real estate investor, happen to have a good amount of cash available for your next investment. You ask them how much they would care to sell their home for in the event that someone can pay cash, and you strike up a deal. A single conversation can lead to a great investment opportunity for you.
If you get into the habit of networking with everyone you meet, in the sense that you discuss your profession and gauge others’ interest in it, you may discover people that are willing to invest, people that wish to offload their dated properties, people that have friends in high places and can help connect you to a potential business partner, or people that genuinely want to learn more about real estate investment. This is a habit that can lead to more business, more acquaintances, and more opportunities.
Habit 10: Build a long-term plan
If you’re a successful real estate investor, it’s a good idea for you to get in the habit of building a long-term plan for yourself. You should start thinking about your retirement long before you reach the age that you wish to retire. Building a long-term plan may include incorporating your investment business into an LLC or S-corporation. It includes talking to your tax accountant on a regular basis, as he or she can help uncover tax benefits and incentives that are already a normal part of your business expenses. It also includes determining how many properties you want to own at any one time, and what your long-term investment strategies are.
It’s not entirely crucial that you stick to every aspect of your plan. It’s merely a good habit to become forward-thinking and to understand the future implications of your current habits. When you build a habit of thinking ahead, you become a better business person today. You also reduce the chances that you’ll be caught in a rough financial situation or come upon your retirement empty-handed. Long-term planning such as estate planning ensures that you know how your investments will be handled among future generations. It’s good business practice for you to look ahead and ensure that your investments provide you a fruitful life for many years to come.
Now that you understand ten important habits of a successful real estate investor, try to apply these concepts to your own life and reap the many benefits of a positive attitude and solid work structure. Real estate investing is not a normal job – you don’t have the ability to take advantage of some of the benefits of a regular office job like team camaraderie and structured processes. The burden is on you to build a process for your business and stick to it. You’re also responsible for keeping your own spirits high when the going gets tough. Keep these ten habits in mind and you will conquer any challenge that comes your way.