7 Things Serious Investors Always Do
I work with and write articles on individual, more hobbyist style investors and I also work with serious and seasoned investors who desire to build long term, million dollar portfolios. There are similarities these investors share, and indeed there is an interesting difference between the two investors as well.
Both investors want to invest in real estate as they believe it is one of the strongest investment classes available to them today.
Both investors believe they are serious investors and will make a fortune in real estate. Yes, even the hobbyist investor believes this.
The differences set in
Focus, or lack thereof, is the biggest thing that separates these two investors. The serious investor has a clearly defined plan as to what they will buy, where they want to buy and precisely why they have chosen the criteria they did to execute their investments.
The hobbyist investor spends the majority of their time chasing the newest shiny object. They read or hear about this investment opportunity and look into it, they start to believe this is their best investment opportunity and just before they pull the trigger and invest they are distracted by, “Oh wait; what is that over there”, perhaps I should look into that further.
I know this reads silly but I see this happen by almost half the investors out there. Often people are so busy chasing the next shiny object they never make an investment at all. After looking into so many different things, they get confused and decide to take some time off and regroup because in their minds the markets are now less attractive and perhaps they will look later after things heat up again.
7 things serious investors do
1. Focus: Seasoned and serious investors always have the entire picture in mind. Just like a radar machine scanning back and forth or perhaps a quarterback looking to pass the ball. Identifying all the players, weighing out their risks and rewards, looking at the anticipated outcome of their next action and then making a decision and executing that decision with confidence and without wavering from it.
2. Begin as they plan to proceed: Having a clear and concise plan for a long term investment portfolio building expedition versus simply a plan to buy an investment property and then worry about what the next investment will look like. This investor already knows what he wants his/her entire portfolio to look like and begins as they plan to proceed.
3. Strategize: with each property purchase it is an important piece to the entire puzzle. It fits into the criteria of their investment portfolio. For example I have been working with a gentlemen who desires to acquire 10 properties per year. His first two properties must be high cash flow properties. The strategy is to build up quick cash to build reserve funds for security. Then to acquire 2 strong equity building properties to of course build up equity. As time progresses he can pull some of this equity for future investment leverage, and the cash flow to his portfolio remains strong with a balance of cash flow and equity.
4. Use safe leverage: many people love to invest in real estate because of the ability to use leverage. Serious investors protect their investments with safe leverage that maintains a safe equity position for them to account for unforeseen market shifts. Many investors, present company included have at one point in their career over leveraged their investments and were forced to sell their high leveraged properties.
5. Leverage their accomplishments: similar to leveraging a property by financing part of it is the ability to leverage an asset that you already own. Lenders feel more comfortable working with people who have proven they have the ability to acquire and manage their assets, The more property you own and control the easier it is to get financing as long as that financing is safe with proper reserves (for each property) built up. Each property you own becomes leverage just like a building block to a strong foundation.
6. Execute their exit strategies: the expression “ you make your money going in” is the ability to have a goal, a reason for buying a particular property, knowing why you are buying it and how you will sell it some day for a profit. As a fix and flip investor plans to sell for quick profit, a buy and hold investor will plan to make great cash flow on the property during the hold and to sell to a retail buyer for years’ worth of equity buildup.
All too often new investors will buy with one exit strategy in mind and decide to switch exit mid-stream, their lack of focus prevents them from ever making serious money.
7. Repeat: Life is not a destination it is a journey. I have not yet found anyone who wants to buy a set amount of properties for a set number of years and then simply quit. As you perfect the investment model that you have built, and as you have bought a property, profited from it and then executed a profitable exit strategy, you of course want to repeat and do it all over again. Hey, why quit when you have built a passive income generating machine?
Being outside the box looking in it is easy to see how different these two different investors behave. I trust you too now see this difference.
Happy investing my friends!