Real estate has long been regarded as a sound investment. Wholesaling and management of commercial and residential properties are just two of the many ways investors can profit from real estate, but it does take a certain savvy to become successful in this competitive arena.
While some universities offer coursework and programs that specifically benefit real estate investors, a degree is not a prerequisite for profitable real estate investing. Whether an investor has a degree or not, there are certain characteristics which top real estate investors commonly possess.
1. Treat Investments as Businesses
It is important for real estate investors to approach their real estate activities as a business in order to establish and achieve short- and long-term goals. A business plan allows real estate investors to not only identify objectives but also determine a viable course of action leading to their attainment. A business plan also allows investors to visualize the big picture, which helps maintain focus on the goals rather than on any minor setback. Real estate investing can be complicated and demanding, and a solid plan can keep investors organized and on task.
2. Know Their Markets
Effective real estate investors acquire an in-depth knowledge of their selected market(s). The more an investor understands a particular market, the more qualified he or she will be to make sound business decisions. Keeping abreast of current trends, including any changes in consumer spending habits, mortgage rates, and the unemployment rate, to name a few, enables savvy investors to take in current conditions and plan for the future. Being familiar with specific markets allows investors to predict when trends are going to change, creating potentially beneficial opportunities.
3. Maintain High Ethical Standards
Realtors are bound by a code of ethics and industry standards, while real estate agents are held to the rules and standards of each state's real estate commission. On the other hand, unless they are associated with membership-based organizations, and as long as they operate within the boundaries of the law, real estate investors are not typically required to maintain ethics-based practices. While it would be easy to take foul advantage of this, most successful real estate investors maintain high ethical standards. Since real estate investing involves actively working with people, an investor's reputation is likely to be far-reaching. The consequences for an investor lacking in ethics can be damaging, particularly over the long haul. Effective real estate investors know it is better to conduct business fairly, rather than seeing what they can get away with.
4. Develop a Focus or Niche
Because there are so many ways to invest in real estate, it is important for investors to develop a focus in order to gain the depth of knowledge essential to becoming successful. This involves learning everything about a certain type of investment – whether it is wholesaling or commercial real estate – and becoming confident in that arena. Taking the time to develop this level of understanding is integral to the long-term success of the investor. Once a particular market is mastered, the investor can move on to additional areas. Savvy investors know that it is better to do one thing well than five things poorly.
5. Get Good at Customer Service
Referrals generate a sizable portion of a real estate investor's business, so it is critical that investors treat others with respect. This includes business partners, associates, clients, renters, and anyone with whom the investor has a business relationship. Effective real estate investors are good at customer service, particularly at paying attention to detail, listening and responding to complaints and concerns, and representing their business in a positive and professional manner.
6. Stay Educated
As with any business, it is imperative to stay up to date with the laws, regulations, terminology, and trends that form the basis of the real estate investor's business. Keeping current requires work, but it can be viewed as an investment in the future of the business. Investors who fall behind risk not only losing momentum in their businesses but also legal ramifications if laws are ignored or broken. Successful real estate investors take the time and make the effort to stay educated, adapting to any regulatory changes or economic trends.
7. Understand the Risks
Those choosing to invest in the stock or futures markets are inundated with myriad warnings regarding the inherent risks involved in investing. Numerous agencies, such as the Commodity Futures Trading Commission, require disclaimers to warn potential market participants about the possibility of a loss of capital. While much of this is legalese, it has made it clear to people that investing in the stock or futures markets is risky; meaning that one can lose a lot of money. Greenhorn real estate investors, however, are more likely to be bombarded with advertisements claiming just the opposite – that it is easy to make money in real estate. Prudent real estate investors understand the risks associated with the business – not only in terms of real estate deals but also the legal implications involved – and adjust their businesses to reduce any risks.
8. Work with a Reputable Accountant
Taxes comprise a significant portion of a real estate investor's yearly expenses. Understanding current tax laws are not easy and take time away from the business at hand. Sharp real estate investors retain the services of a qualified, reputable accountant to handle the business's books. The costs associated with the accountant can be negligible when compared to the savings a professional can bring to the business.
9. Find Help When They Need It
Real estate investing is complicated and requires a great deal of expertise to engage in the business profitably. Learning the business and the legal procedures is challenging to someone trying to go it alone. Effective real estate investors often attribute part of their success to others – whether a mentor, lawyer, accountant, or supportive friend. Rather than risk time and money solving a difficult problem on their own, successful investors know it is worth the additional costs to find help when they need it, and embrace other peoples' expertise.
10. Build a Network
A network can provide important support, and create opportunities for new and experienced real estate investors alike. This group of associates can be comprised of a well-chosen mentor, business partners, clients, or a non-profit organization whose interest is in real estate. A network allows investors to challenge and support one another and can aid significantly in advancing one's career through shared knowledge and new opportunities. Because much of real estate investing relies on experiential-based learning, rather than on book knowledge, savvy real estate investors understand the importance of building a network.
The Bottom Line
Despite ubiquitous marketing materials claiming that investing in real estate is an easy way to grow wealthy, it is in fact a challenging business requiring expertise, planning, and focus. In addition, because the business revolves around people, investors benefit in the long run by operating with integrity and respect for clients and associates. Though it may be relatively simple to enjoy short-lived profits, developing a viable real estate investing business that can last requires additional skills and effort. Whether focusing on apartment buildings or commercial property, highly effective real estate investors share the 10 essential habits above.