3 Must Dos in Real Estate Investing
I have had a number of conversations with new investors who struggle to actually make good real estate investments. They are perplexed because when they purchased an investment property the pro-formas looked great, but all kinds of obstacles came up and their investments just failed to perform. Others failed to get any kind of lift off at all as their investments were losing money day one due to unexpected expenses that were not factored into the equation.
People do not plan to fail they fail to plan:
This is one of the most profound statements I have heard. It has been around for years. No one plans to fail, however many people fail to plan. They use hope and prayers as their strategies and hope is not a strategy.
3 MUST DOS in real estate investing
An investment plan:
As it is now a new year, have you indeed written or updated your investment plan? Investments do not just happen, they are strategically identified, searched, found and created. If you just hope to find a great investment that makes sense you will probably never find it, simply because you are not even aware of what a great investment looks like because you have not identified what that means specifically for you.
Seasoned investors know they will make money, they do not have to second guess it because they have a written strategy of what they will invest in, what the numbers need to look like on the pro-forma for them to purchase and what their exit strategies will be. They know what their due diligence will entail and have the entire process start to finish already strategized. They share all of this with their Power team which includes their Realtors, accountants, attorneys, trades people and property managers.
Your Power Team
All these power team members are on the same exact page with you to assist in executing your goals. They become strong advocates who help you to accomplish these goals and often help identify properties for you as well. With a great investment system all you have to do is execute your strategies.
Best Locations identified:
Often the most overlooked portion of an investor's investment or strategy plan is to identify the best locations. Everyone knows real estate is all about location and this is equally and perhaps even more important for the investor. Many investors believe location is for the home buyer's best interest.
The truth is a home buyer and an investor have different ideologies behind the best location. For the investor, they want to find a city that has strong economic fundamentals, low unemployment rates, great job diversity and they want to invest in undervalued markets to insure long term sustainable investments.
Have a great exit strategy:
As the old saying goes you make your money going in. You may realize the cash on the way out,but before ever making the purchase you want to know what you are buying a property for. What you want it to accomplish for you, approximately how long you may want to hold the property and when you may want to sell it.
You want to know who your target market will be that will buy the property from you. This gives you clarity up front as to what you want to buy, how you want to structure the deal and how you want to maintain the property to give you maximum return at the time you sell it.
Most of my investors want to buy a property to hold for 5 to 10 years. They plan on selling when the market suggests it is at its peak selling potential for highest returns. They want to sell to an end user that will pay them retail price for their property. Knowing all this up front allows them to buy the property that will best fulfill this exit strategy.
Be specific to be terrific:
You have probably heard the expression, "Everything he touches turns to gold". This is typically because he is specific about what he wants, is purposeful about how to get it. He strategized a plan and executed it as planned.