SS201: Top 6 Lessons from Successful Real Estate Investors

SS201: Top 6 Lessons from Successful Real Estate Investors

In this episode, Charles discusses the most common lessons and advice he has learned from speaking with thousands of real estate investors.

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Talking Points:

  • After interviewing and speaking with thousands of real estate investors and being a multifamily investor since 2006. I have heard a few recurring lessons repeated by successful real estate investors. Hopefully, these basic but valuable insights can help guide new and seasoned investors.
  • Be Strategic
    • Determine your long-term goals and develop a plan to obtain them. If you want to purchase 50 units over the next 10 years, be specific on your target area and stick to it. One issue I have heard from real estate investors who have encountered challenges is having small properties scattered everywhere. Compare this to some successful investors I have interviewed, such as Bryan Driscoll in episode GI247, who only purchase properties in one zip code. This rule that Bryan has makes his acquisitions and management much easier, but he also probably knows more about real estate in that zip code than any other investor. It gives him a huge advantage when looking at properties, estimating renovations, submitting offers, setting rents, and managing tenants. When you focus, agents, investors, and real estate professionals consider you a much more serious investor.
  • Thorough Due Diligence
    • Performing thorough due diligence is the cornerstone of being a good investor. Due diligence is needed on the market, neighborhood, and property. Don’t avoid hiring multiple inspectors or contractors during the physical due diligence phase of the purchasing process. This small price is worth the honest feedback you will receive, making you a more informed and confident investor.
  • Fixed-Long-Term Debt
    • If you purchase a 1–4-unit rental property, 30-year fixed debt is readily available. But, if you are purchasing a commercial property, the debt terms are usually 5, 7, or 10 years before you need to refinance. Even though the interest rate is typically higher, opting for longer debt will give you peace of mind as an investor. You now have 10 years to renovate the property, increase rents, and increase the value. At the end of 10 years, you can refinance the property, take out some cash, and continue to receive monthly cash flow.
  • Focus on Cash Flow
    • One way to minimize your risk when buying real estate is to purchase a property that is already cash-flowing. It is typical for investors in hot markets to overpay for a non-cash-flowing property because they believe they can quickly add value and raise rents, resulting in the property starting to cash flow. This is a risky strategy commonly practiced, but investors who want to limit their downside risk only purchase cash-flowing properties. It offers the investor the ability to hold the property throughout the ups and downs of the real estate cycle without having to cover the property’s shortfall.
  • Always Have a Reserve Fund
    • I am a staunch proponent of having a reserve fund for any property you purchase, even if it is your residence. Everything takes longer and is more expensive than you think. Renovations take longer and cost more. New tenants might not move in right away, leaving you needing to cover the rent until they do. The reserve fund can vary depending on the size and condition of your property, but I would start with 4-6 months of expenses put aside and add to it every month. Successful real estate investors always have a reserve fund.
  • Build a Reliable Network
    • Successful real estate investors have a network, including real estate agents, contractors, vendors, property managers, attorneys, lenders, handymen, and other investors. Building out a network will make your real estate investing career much easier. When there is a problem or a question, reach out to them. As you do more deals and work with people within your network more often, they will become more accessible and more vested in your success.

Transcript:

Charles:
Ever wondered what sets the best apart from the rest in real estate? Do they have a secret formula or is it a smart strategies and hard work? Well, you’re in luck. Today we’re uncovering the exact strategies that have helped investors dominate the market and secure massive success.

Charles:
Welcome to Strategy Saturday; I’m Charles Carillo, and today we’re going to be discussing the top six game changing lessons from some of the most successful real estate investors out there. So if you’re ready to take your investing game to the next level, stay tuned. You won’t want to miss these crucial insights that could transform your approach. Ready to find out what they are. Let’s jump in. After interviewing and speaking with thousands of real estate investors and being a multifamily investor myself, since 2006, I’ve heard a few recurring lessons repeated by successful real estate investors. Hopefully these basic but valuable insights can help guide new and seasoned investors.

Charles:
Number one is be strategic. Determine your long-term goals and develop a plan to obtain them. If you want to purchase 50 units over the next 10 years, be specific in your target area and stick to it. One issue I’ve heard from real estate investors who have encountered challenges is having small properties scattered everywhere. Now, compare this to some successful investors that I’ve interviewed such as Brian Driscoll in episode GI 2 47, who only purchases properties in one zip code. Now, this rule that Brian has makes his acquisitions and management much easier because he already knows about the real estate in that zip code. And more than any other investor, which makes it easier for him to pull the trigger makes due diligence much simpler, and it gives him a huge advantage when looking at properties, estimating renovations, submitting offers, setting rents, and managing tenants. When you focus agents, investors and real estate professionals consider you a much more serious investor.

Charles:
Number two is thorough due diligence. Now, performing thorough due diligence is the cornerstone of being a good investor. Due diligence is needed on the market, the neighborhood, and the property itself. Don’t avoid hiring multiple inspectors or contractors during the physical due diligence phase of the purchasing process. The small price is worth the honest feedback you’ll receive, making you a more informed and confident investor. Number three is fixed long-term debt. So if you purchase one to 40 unit rental properties, 30 year fixed debt is readily available. But if you purchasing a commercial property, let’s say the debt terms are usually five years, seven years, or 10 years before you need to refinance. Now even though the interest rate is typically higher, opting for longer debt will give you peace of mind. As an investor, now you have 10 years to renovate the property, increase the rents, and increase the value.

Charles:
At the end of the 10 years, you can refinance the property, take out some cash, and continue to receive monthly cash flow. Number four is focus on cash flow. One way to minimize your risk when buying real estate is to purchase a property that is already cash flowing. It is typical for investors in hot markets to overpay for a non-cash flowing property because they believe they can quickly add value and raise rents resulting in the property starting to cash flow. Now, this is a risky strategy commonly practiced, but investors who wanna limit their downside risk only purchase cash flowing properties, it offers the investor the ability to hold the property throughout the ups and downs of the real estate cycle without having to cover the property shortfall. And this is one thing you’ll see during hot markets. You’ll have new investors come in there ’cause they see all this money that’s being made on people that hold properties for, you know, one year, two years, three years.

Charles:
But that’s not true. Real estate investing, that’s real estate speculation. True real estate investing is when you’re going to buy a property and your proposed whole time is 5, 10, 15 years. Now obviously, if someone’s gonna pay you triple what your properties, you know what you bought it for in three or four years, you’re, you’re probably gonna sell it, right? But you’re going in there with the mindset they’re gonna hold this for a decade or more, and this is the business plan that you’re putting in place for that. Number five is always have a reserve fund. You know, I’m a staunch proponent of having a reserve fund for any property you purchase, even if it is your own residence. You know, everything takes longer and is more expensive than you think. Renovations take longer and cost more. New tenants might not move in right away, leaving needing you to cover the rent until they do.

Charles:
And the reserve fund can vary depending on the size and the condition of your property. But I would start with four to six months of expenses, put aside and add to it every month. Successful real estate investors always have a reserve fund. Number six is build a reliable network. So successful real estate investors have a network including real estate agents, contractors, vendors, property managers, attorneys, lenders, handyman, and other investors. Now, building out a network will make your real estate investing career much easier when there’s a problem or a question or reach out to them. As you do more deals and work with people within your network, more often they’ll become more accessible and more vested in your success. Now, when I say investors in there, obviously they’re not gonna be really invested for your success in the future. But the thing though is that every time I’ve done deals with full-time investors and when I was coming up, it was one thing that what I would do is always keep their information and I would always send out, or when I had a question, I would send a text out to them and be like, Hey, who would you use for this?

Charles:
Or I’d give them a call. They always picked up, they always responded, and I always get good information. So anybody that you’re working with and you’ve worked with them before, and if you are in a market and you are a professional and they’re in a market and they’re a professional, the chances are that you are doing deals with them. There’s been investors that my dad’s bought and sold properties with that I myself have bought and sold properties with that my brother has bought and sold properties with. So when you’re doing that, that means that you guys are building a relationship. Even though you’re looking for properties, probably the same type of properties. Sometimes you’re gonna get a call from ’em and say, Hey, I have too many properties or I have, I’m trying to sell this, or whatever it might be. You might get a deal and you might be able to use any kinda questions you have and bounce them off that other investor.

Charles:
And that is something that most other people don’t have. And when you have access to this reliable network that’s gonna put you ahead on other investors, it’s gonna give you a leg up because you’re gonna have more knowledge and you’re gonna have more people that you can speak to, to verify what you think is correct or maybe it’s it’s not true. So I hope you enjoyed. Please remember to rate, review, subscribe, submit comments and potential show topics at globalinvestorspodcast.com. If you’re interested in actively investing in real estate, please check out our courses and mentoring programs at syndicationsuperstars.com. That is syndicationsuperstars.com.

Charles:
Have you always wanted to invest in real estate, but didn’t have the time, didn’t know where to find the deals, couldn’t get the funding and didn’t want tenants calling you. Since 2006, I’ve been buying income producing properties and great locations that provide us with consistent passive income. While we wait for appreciation in the future and take advantage of tax laws while we’re waiting and unlike your financial advisor, we invest alongside our investors in every property we purchase. Check out to investwithharborside.com. If you like the idea of investing real estate, if you like the idea of passive income partner with us at investwithharborside.com, that’s investwithharborside.com.

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar, LLC, exclusively.

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