Everyone knows that real estate can be a very lucrative industry, but for every person that becomes a success there are about nine people that fail. The statistics are frightening, but for the truly dedicated, success is really just a matter of preparation and perseverance.
There are plenty of great real estate investors out there that are predisposed to success because of the way they naturally handle their business. These people are not only knowledgeable about their industry, but they are also proactive and goal-oriented about their finances. If you want to become a financially-secure real estate investor, focus on the developing the following habits:
1. Running the Numbers
Successful investors won’t spend anything until they’ve taken a look at the financial projections. What does that mean for you as a new real estate investor? It means that you need to not only estimate the end value of the home compared to the opening value, but you’ll need to make careful estimates about the cost of repairs, upgrades and sales fees. You also need to be prepared for unexpected issues that cost time and money. Anything from bad weather to awkward government regulations can affect your renovations and resale, so be prepared with a “plan b” and put emergency funds in your budget.
2. Researching the Neighborhoods
Residential properties aren’t just stand-alone investment opportunities—they have value that is directly related to the area in which they were built. You can take a low-value house and put a million dollars into it, but if the rest of the neighborhood is unpopular you’re going to lose all that money. Make sure the properties you invest in are in an area where the market is healthy, so that when it comes time to sell you’ll get the price you planned for.
3. Developing a Network
There’s no use in having a set of wonderful properties for sale if you can’t find anyone to sell them to. Keep your contacts updated, and they’ll spread the word to any friends, family, or colleagues that are looking for real estate. When you create a marketing network this way, you’re also building up your reputation so that people will go out of their way to find you.
4. Planning Your Exit
Don’t just plan how to get into a real estate project; you need an exit strategy, too. Otherwise, your renovation schedule could go too long and you’ll find yourself paying the mortgage every month until the project is done. When you finally sell the house, you’ll be lucky to break even, let alone make a profit.
Sixty-two percent of Americans would not be able to cover unexpected expenses, including those related to real estate property renovations and repairs. If the project doesn’t go as planned you’ll need to have a contingency plan ready so that you still have a clear end point where money can be made.
5. Buying Low and Selling High
You’ve heard it before and you’ll hear it again. This is the mantra of the investment world for a reason! Though you may think this is redundant advice, you’ll be surprised how easy it is to ignore when you start flipping houses. Without a solid plan and the ability to follow it through, you’ll easily find yourself investing unprecedented amounts of money into a house that has more issues than you anticipated. You might be tempted to sell at a loss just to get out of the project and move on. Don’t give in! Take a deep breath, consider your options, and find a way to make a profit.
6. Knowing the Market
Just because the housing market is booming this season doesn’t mean it will be in the same shape a few months down the line when you are ready to sell your investment property. Stay informed about purchasing trends, changes in consumer spending, and mortgage rates. This way you’ll be able to make better informed decisions about the properties you buy and the way you renovate and upgrade them.
7. Establish Your Integrity
Just as you need to develop a network, you’ve also got to make sure your reputation is untarnished. Be a businessperson with integrity. It’s easy to lead buyers on and flip houses that are lower quality than they seem at first glance, but if you want to last in the industry you’ll need to be honest. Integrity will earn you happy customers, lots of referrals and a booming business.
Make It Work with a Positive Mindset
Three percent of Americans consider themselves to be real estate investors, with plans to acquire a new investment property sometime within the next 12 months. If you want to establish yourself as a member of this group, you’ll need to commit completely to the process and emulate the habits of real estate gurus.