The concept of real estate investing is very appealing. Real estate is a very powerful tool to generate income and build wealth depending on the vehicle you use. In order to have a chance to be successful in this industry there are some standard rules that you need to follow to give yourself the best chance to reach success. We have developed the following rules to help keep you on track and to have a good understanding of what it will take to reach the success you desire. These are the same rules that we apply daily and consistently preach within our organization.
1) Education
We start with education. This is the foundation of your real estate business. Learning and developing the proper knowledge to educate yourself on the path you would like to take for you real estate journey is very important. You need to get a good understanding as to which vehicle intrigues you the most and to begin educating yourself on that vehicle so you have a good foundation to make solid business decisions when the time comes. If you do not have the proper knowledge you will be solely counting on the advice from outside parties, while this may not be a bad thing, you need to have the knowledge to decipher if they are guiding you in the right direction. While your education will be the initial building block to your success, we do not want you to only educate yourself and never take any action. In today's society there are so many free resources available to the average person through blogs, podcasts, ebooks, websites, courses and books.
2) Commitment
In order to be successful in this business you have to commit to it. The real estate investment business is a long journey towards success. It takes time, energy and effort to execute the model you choose. If you are not committed, it will be very easy for you to bail out when the times get tough. Create a plan, stay committed to that plan and always continue to educate and learn along way to improve your plan.
3) Set Goals & Create A Plan
In any journey, you need a road map to always fall back on when you may steer off course. During the education phase of your journey, you will discover several different vehicles that you can choose to enter the market of real estate investing. You will learn about wholesaling, house flipping, traditional buy & holds, apartment syndication, lease options, subject 2 deals, etc. When you create your plan, the first thing you need to decide on is the exit strategy that you will want to use to build your business off of. This will either be wholesaling, house flipping or holding. Once you determine that, we can use several different creative strategies to acquire. Once you determine your exit, we need to begin setting goals for ourselves. We suggest always setting lofty goals, as if you fall short, you have still reached a level of success. Set goals and repeat these goals to yourself on a daily basis. Become inundated with the goals you set and work your plan to execute your goals.
4) Consistency
Whether you are wholesaling, rehabbing and selling or holding, you are going to have to be consistent day in and day out in regards to your plan. Your consistency to do things that others do not want to do on a daily basis will separate you from your competition and bring more success in your life. Whether it is marketing, analyzing deals, creating systems and processes, educating yourself or networking, be sure that you stay consistent with your plan and do not give up.
5) Never Speculate
One of the ways that real estate investors get in trouble and take losses is through speculation. They have not done their homework on the deal and they are hoping for outside forces to play a roll in making them money. When you are investing, you never want to work a deal where you are solely counting on appreciation. Markets have a history of doing crazy things and just because your market may be seeing solid appreciation rates, does not mean that there will not be a correction. Stick to the fundamentals, take a long term approach and always invest for cash flow.
6) Have A Plan For Each Deal
Each deal you are looking at should have a specific business plan for it considering the specific variables associated with product. Before you purchase, you should if you are going to plan to hold the building for the long term, if the greatest return will be to sell the property in 5 years, if you are going to refinance after year 2 to give your investors some money back and keep them in the deal, what the value add play is and how you will execute it. Just make sure that you have a plan going into the deal, it makes sense and you execute the plan in place.
7) Be In Control
Whenever you invest in real estate you want to be in control. Always be the direct investor. Never own real estate through funds, partnerships or other paper based assets when you own shares of the entity you do not control. One of the greatest benefits of real estate is you can feel, see and touch it unlike owning stocks and bonds where you own paper. Also when you are in control, you can always make minor adjustments to improve the performance of the ability. You are the CEO and President, having control will allow you to make the necessary decisions to generate more income and build additional wealth.
8) Leverage - Utilizing Other Peoples Money
Real estate offer's you the power to get into deals using very little or none of your own capital. By utilizing other peoples money in your deals by either offering debt or equity, it will allow you to scale your operation and increase your ROI due to the limited funds that you need to put up on each deal. Building a network of alternative funding sources, will be vital to your success in real estate. Networking to raise private capital is a skill and your ability to prove to be a good operator will be very impactful.
As you begin your real estate investing journey, take a look at these 8 rules and try to abide by them. As you move along your journey and begin finding success, you will begin to develop your own rules that you will stick by and fall back on to ensure success. We hope that this blog post gave you some insight into some of the rules that you should pay attention and follow to find the success you are dreaming of.