Whether you invest in real estate by flipping houses, being a landlord, seller financing, or another way, there are certain things you want to be doing. Here are six tips to improving your bottom line and ability to be a successful investor.
1. Set a clear goal. Without a clear goal, investors tend to start down one path but change their mind every time a new idea comes along. You will change your goals over time. For instance, the foreclosure market is drying up and it's time to move on to something new. Maybe distressed sellers. However, once you have a goal, be sure to pursue it at least until it becomes clear that it's flawed. Following one goal or strategy for two weeks and then changing to another will not bring you success. Along with a goal, you need a measurable schedule that lets you know if you are making appropriate progress towards your goal.
2. Stay informed. You should have a plan for a continuing education. Just like any industry, real estate investing is constantly moving forward. In many states, there are specific requirements for real estate agents to take continuing education. As an investor, you should be doing the same thing. Some of your continuing education options are attending workshops, online seminars, university course, and downloading training courses online.
3. Stay in contact with successful investors. Often this involves joining an investment club. Before doing so, learn about the different investment clubs in your community. Different clubs have different objectives. You want to join one meeting the needs of your goals and strategy. Attend club meetings on a regular basis. This is the easiest and most effective way of staying on top of developments in the local market.
4. Have financial goals. Without specific financial goals, you'll find it difficult or impossible to correctly analyze potential real estate deals. Investors flipping houses typically set a purchase price goal of 30% below market value after repairs. Another good financial goal is reinvesting profits back into your investment business. You might set a goal of first repaying all of your costs from a deal and then adding 25% of the profits before putting money into your personal bank account. This is a great way to make sure your business consistently grows.
5. Research new opportunities. This is especially true when you decide to set a new goal. Don't just hook onto the next shiny object. Maybe you should be investing in a real estate trust instead buying and selling individual properties. There are hundreds and probably thousands of trusts out there. It would be prudent for you to thoroughly research the best ones you can find before making an investment.
6. Learn from mistakes. Even the most experienced investors make mistakes. When a deal goes south on you or when it's less profitable than you intended it to be, take the time to make a thorough analysis of what went wrong. Did unplanned problems come along? How could you have better foreseen the problems? Were there hidden costs you didn't plan for? How could you have better estimated the costs? And don't only learn from your own mistakes. When you are at investment club meetings don't only ask successful investors how they became successful, also ask them what mistakes they made along the way and how they avoid those mistakes today.
Real estate investing can be a tough but rewarding business. It takes experience and plenty of due diligence. Following these tips will improve your opportunity for success.