Article
Essential Guidelines for Beginning Investors
Real estate investing is not a “get rich” quick proposition
as many of the late night infomercials would lead you to believe. If you’re
getting into real estate investing then you should be prepared to treat
it as an active business. As such, several fundamental strategies will
help you as an investor to ensure you have the greatest chance of success.
1) Surround Yourself with Like-Minded People
Real estate investing can yield phenomenal returns over time. But to put
these returns on an even faster path, you must think and act in non-traditional
ways, meaning you must practice to some extent what is often referred
to as “creative real estate”. If you’re practicing creative
real estate, you will be doing things in ways that differ from the approach
of the masses. Stay away from the negative minded people that say it won’t
work or can't be done and instead surround yourself with people that think
and act as you would like to be.
2) Have the Right Team
As I teach investment classes, I always start by recommending the students,
if they have not already done so, to form their advisory team. You should
never wait until you have an opportunity in the pipeline to try and line
up the assistance you need to close the deal. You need the following members
on your team:
• Closing attorney - one knows creative
real estate practices, and that has significant experience, but that doesn’t
cross the line of the law in the name of creativity.
• Insurance Agent - find one that
understands real estate investments and that has excellent service. If
you operate in a corporate entity (recommended) then keep in mind your
agent should offer commercial insurance on your type of investment.
• CPA - find one that is aggressive
and owns real estate, and that has a wealth of experience in working with
clients with similar needs as those that you have.
• Mortgage Broker or Lenders –
work with lenders and brokers that are experienced with investors. If
dealing with a broker, be sure they actually CLOSE a dozen or so loans
a month with investors, not just ORIGINATE loans. Working with direct
lenders is better if you have great credit as you cut out the middle man.
Develop those relationships with money sources ahead of time.
• Real Estate Agent – Find
one or more hungry real estate agents that are willing to help you and
then train them. Work on a deal by deal basis and treat them like gold
if they bring you the opportunities. I get more deals through agents than
almost any other way, and it is not limited to deals on the MLS. In fact,
most of the best deals agents bring are BEFORE they are listed.
• Property Manager – If you’re
looking to grow, you likely need some professional management to help
you manage your inventory. You might want to manage a few properties on
your own, but eventually turn this over to experienced professionals and
use your time to focus on building your wealth.
3) Deal Only with Motivated Sellers
Wasting time with unmotivated sellers is one of the biggest mistakes I
see beginning investors making, and the one that keeps many from the success
that could otherwise be theirs. Real Estate Investing is a discount-buy
business. If the seller does not have a valid reason and is not motivated
to sell at a discount, move on. Don’t waste time talking to sellers
who are not motivated. Also, be sure to qualify deals over the phone before
wasting time running comps or performing other due diligence. Time is
your most valuable asset!
4) Be Patient and Persistent
In this business, or any other, you will have to deal with some rejections
before you find the winners. You may look at dozens of opportunities before
you find a good one. Not every deal that comes your way will work. And
then sometimes, you will work on a deal that will not pan out, and you
may have to follow-up a half dozen times to finally work it out. Don’t
give up. You must have patience and be persistent. Don’t chase losers,
but if you find a winner, pursue it as long as it takes. Also, it is important
to have a tool to track your opportunities so you can keep track of leads
and follow-up. We currently use Outlook as our contact manager, but there
are many others out there such as Goldmine and Act! that have even greater
functionality.
6) Invest in Your Education
It has often been said, and rightly so, "If you think education is
expensive, try ignorance." In real estate investing, a SINGLE mistake
can cost you tens of thousands of dollars. Unless you have a very thick
skin, and even thicker pocket book, be sure you KNOW what you’re
doing. It is far cheaper to have some education than to try operating
a business from a position of ignorance. No matter how long you’ve
been in business, you should continue growing your education. Set aside
money each year to invest in yourself -- it is the best investment you
can make and will pay HUGE dividends over time. NOTE:
Don't get sucked into the super expensive boot camps until you've got
your feet planted on the ground. There are many sources of low cost, quality
education out there. Develop an education budget that makes sense and
stick to it!
7) Have a Realistic Plan
Any successful business owner knows that without a plan your chances of
success are DRASTICALLY reduced. You’d be amazed however at how
many people start up an active real estate business by just jumping in
and never really thinking through the tactical and strategic matters that
are necessary to ensure a reasonable chance of success. You should get
your big picture goals clearly defined and then define workable steps
for achieving those goals. Find others that have experience you can tap
into to help you develop your plan. Team up with knowledgeable experts
to learn how and what they do to be successful. Seek out experienced people
to partner with on opportunities. Leverage their experience to ensure
your plan is solid. Never just wander around looking for deals, hoping
things will work out for you. Have a plan.
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