When it comes to investing in real estate, it seems like there are a million and one things to do. To be truly successful in this business, however, it’s crucial that we as owners are focusing our energies on doing the right things.
If you want to really grow your net worth and reach your financial goals—whether it’s crafting the perfect million dollar portfolio, retiring early, or fueling your lifelong ambitions—you have to have focus.Too many times real estate investors get caught up not in investing but in doing so much heavy-lifting around their investments that they miss so much of their growth potential. Don’t make that mistake. Instead, focus your energy where it really counts.
2 Things Real Estate Investors Must Actually Do
Craft a Plan
When investing in real estate, the plan is critical. Do you understand why you’re investing in the first place? What end goal do you have in mind? Your plan is more than just knowing how much money you want to make. It’s understanding what you want to do with that cash flow, how many properties you want to have, and, ultimately, knowing why you want to invest, not merely that you want to do it.
Investing in real estate isn’t for everyone.
Most of the time, you won’t know whether or not it’s for you until you’re elbow-deep in it.
What do you want? Different investors are looking to gain different things. You might want to craft that million dollar portfolio. Maybe you want to accumulate assets or create many streams of passive income. The actual act of investing will often look the same, but your decisions will vary depending on what your goals are and what your ultimate “why” is.
Your strategy will materialize in a different way, too, depending on whether or not you intend to invest actively or passively.
Due Diligence
Due diligence is one of the elements of investing in real estate that we just can’t understate. For a turnkey real estate investor, the most crucial part of due diligence is two-fold: investigating potential investment markets and investigating potential turnkey companies to partner with.
There are so many potential turnkey partners to work with, and not all of them will suit your individual needs and goals. You have to ask the questions and be diligent in pursuing the answers. This is part of why it’s so important to have a plan!
Do they own the property management company? Do they expect you to pay for properties all in cash or do they help you obtain institutional financing? Will they help you plan out your portfolio and offer advice, or are you on your own? Do you need to take care of your insurance and taxes independently? What other services do they offer? Even though you’re working with a turnkey company, don’t make the mistake of assuming that everything is taken care of. Look out for hidden costs as well.
Make sure that the people you’re working with are compatible with you. These are all critical to your success. A good turnkey partner creates the solid foundation for lifelong investment success. The wrong one can lead to disaster.
In the same way, investigate the market. You need to be excited about where you’re investing. That doesn’t necessarily mean being in the hottest markets. But like where you are. It needs to capture your attention in some way.
Due diligence in a market involves a few different things: investigating trends like job and population growth, housing market conditions, and making local contacts. If possible, visit. It’s always a good idea!
1 Thing Real Estate investors Must NOT Do
Get Lost in the Weeds
Regardless of the type of real estate investor you are, active or passive, the one thing you can’t afford to do if you want to be successful is get lost in the weeds. For a passive investor, this means getting caught up in work that you really shouldn’t be doing.
Your job is simply to invest. You should be putting your money into your investments and be getting more out of it that you put in. Period. Your focus should be on high-level strategy, communicating with your turnkey provider, and making decisions as you need to. Your place is not in landlording or getting late-night calls.
You should never be stressed about the daily operations of your properties. If you are, you’re not really investing passively in real estate and something isn’t functioning as it should.
As for active investors, getting lost in the weeds looks a little different. It’s more about getting hung up on the wrong things. Regardless of how you’re investing, there are certain things that just don’t ultimately matter: be careful not to pursue total perfection. You won’t find it and you don’t need it to succeed. Don’t get so caught up in minute details that you get tripped up.
Success in real estate investing has so much to do with playing your role well. If you know what you should do and then what is best left delegated, you’ll be ahead of the pack!