The 10 keys to success in real estate investment
July 22nd, 2016
Increase your knowledge of real estate investment.
The more you master the 10 keys presented below, the more likely you will be to achieve the investment goals you have set for yourself. Take note that these 10 keys are not given in order of importance. They are all equally important. You might be able to master a number of them but if you have difficulties with some, it is possible that your investment project is not running as well as you hoped. Without further ado, let’s begin.
Key No. 1: Become a real estate Colombo
The very first advice is not to wait for the market value to drastically drop before you start because we believe you could have to wait for many more years. Immediately get into prospecting mode if you haven’t already done so.
Remember that you must be looking for motivated sellers who will accept to sell below market value, thus making it possible for you to make a profit at purchase. However, you will agree with us that you are looking for extraordinary situations that are sometimes difficult to find. But do not be discouraged; persevere and you will find motivated sellers!
Key No. 2: Learn how to fund your buildings 100%
In any type of investment, the less capital you use, the higher your returns will be. When it comes to infinite returns in real estate, this implies that the building you just bought was done 100% with the money from others. This is what we call maximum leverage effect. However, do you calculations wisely and be very cautious because using leverage at its peak involves a much higher risk than if you were injecting capital at the time of purchase. You are exposing yourself inter alia, to a relatively small and sometimes even negative cash flow (surplus cash).
In the event of a shortage in liquidity caused by the building, will you be able to personally inject capital in order to meet your financial obligations? Please, if you are funding your purchases 100%, be cautious in managing your buildings because your operating budget will be more limited.
Key No. 3: Learn how to prepare creative purchase offers
It is well-known; one of the keys to your success in real estate depends on the purchase offers you prepare, i.e. the quantity of offers you will make but above all, the way you prepare them.
- Are they to your advantage?
- Do they sufficiently protect you?
- Do they enable you to reduce your seed money as much as possible?
In fact, this key is often that which will help you get want you want, i.e. convincing the seller and eventually acquiring the building. To achieve this, you will need to develop the art of bargaining as explained in key No. 5.
Key No. 4: Have the discipline to carry out effective follow ups
This fourth key is the logical follow-up of key No. 3.
I often meet investors who tell me they found great opportunities thanks to the follow up they did shortly after submitting a purchase offer that was initially rejected by the seller.
Many rookie investors make the mistake of letting go a building because their purchase offer was turned down. They believe that if it didn’t work, it was because the said building was not supposed to be theirs!
Reacting this way could be very costly. Juicy profits will slip through your fingers without you knowing it. Placing the dossier in ‘file 13’ isn’t the right thing to do. The dossier should rather go into your monitoring system!
Since you will be looking for motivated sellers, you will have to consider that they will be more and more motivated over time. The more time passes, the more inclined they will be to lower their prices and/or soften their conditions.
Key No. 5: Develop the art of bargaining
During your career as a real estate investor, you will have to constantly bargain, be it with:
- Your tenants
- Buyers, Sellers
- Real estate brokers
- And even with your spouse!
The spouse is one of the best “allies” you could have at the time you’re investing, regardless of the field of investment you choose. Real estate is no exception to the rule. For more information on investment as a couple, read an article I wrote on the subject.
Read books on the art of bargaining, undergo training, practice negotiating on a daily basis. You’ll be amazed with the results.
Key No. 6: Carry out thorough and flawless verifications
Buying property should be taken seriously. That’s why it’s important to verify as many aspects as possible before signing at the bottom of the bill of sale.
Rushing over this step is a blunder that is often very costly to new investors. Having already paid dearly for their mistakes due to the absence of inspections, seasoned investors for their part are decreasingly making this mistake of neglecting the thorough inspection process.
Thorough verification is a good thing, but one still needs to know what to inspect. That is why we have to use the experience of seasoned investors. Join networks and meet experienced investors, they will share their trics with you.
Key No 7: Build a dream team
It is well known; in business, your success will depend on your relations. The more competent and reliable people you surround yourself with, the more likely you are to succeed.
Like in any other business, in real estate human capital is paramount. Indeed, what would companies be without their staff? Maybe you will answer: the customers! My answer is rather:
“Your dream team first and foremost”.
For customers to be satisfied, it takes good products, but what is the best product worth if customer service is lacking?
A company is a single unit; its founder, proper buying, good employees, good business philosophy, good working conditions, etc. Once again, network as often as possible in order to meet those who will be part of your team.
Key No. 8: Get proper training
A common mistake that I’ve often noticed with beginner, intermediary, and seasoned investors is the lack of training. They embark on real estate investment without undergoing any training. Even worse, they seek the opinion and advice of people who don’t even own a building.
It is not uncommon to buy buildings and invest thousands of dollars in them, so why not add a few hundred dollars more for training in order to maximise one’s investment? Remember that in real estate, you juggle thousands of dollars at each of the stages. Lack of knowledge can cost tens of thousands of dollars. The reverse is also true. Some things learned during training are worth their weight in gold.
As the saying goes:
“The entrepreneur never graduates”.
There is thus no limit to the knowledge you can acquire.
Key No. 9: Develop a GOGOGO! action plan
In terms of achieving goals, the important thing is to breakdown your annual goal until you get daily goals. If for one reason or another you do not reach your annual goal, you would have at least taken action and achieved a large number of small and medium-term objectives.
Your self-confidence will increase; you will have a reason to be proud of yourself and may not be very far from achieving your annual goal with a few more actions. As the saying goes, better late than never. For more details on developing your action plan, read an article I wrote on the subject.
Do you now understand why some people do not progress despite having a set goal in five years? They are not taking action to achieve their goal.
For the breaking down of your objectives, here is a metaphor of my friend Jean-Pierre Du Sault, a real estate Investor:
“You wouldn’t think of swallowing salami in one gulp, but cut it into slices and you can do it!”
I think this metaphor sums up my point.
Key No. 10: Get rich by accumulating buildings
Did you know that real estate investment can be divided into two worlds? That of FLIPPING, which will enable you to quickly generate cash in the short term, as well as that of accumulating buildings, which will make it possible for to get rich and generate passive income.
With the accumulation of buildings, your net worth will grow over time because of the combined effect of capitalising mortgage loans and the increase in value of your buildings.
When all is said and done, look at the wealthy people of this world, most of them have active and/or passive real estate investments in their portfolio.
It is up to you to draw your own conclusions.