5 Things I’ve Learned About Being a Real Estate Investor
I’ve had what many would call a successful career
in financial services, public service and marketing
. Throughout my career, I’ve also had the opportunity to dabble in real estate through a variety of purchases, renovations, rentals and sales. Recently, I made the decision to go full speed ahead with real estate investing.
Here’s a short story about what I learned in my first 90 days. 1 – Your Network is your Net Worth.
That is a tag line or slogan of one of the Real Estate Investing groups I meet with regularly, London on FIRE, where FIRE stands for Financial Independence Retire Early. I love that group. I’m not 100% positive but I think the Network/Net-Worth quote came from one of the founders of London on Fire – Matt McKeever. Matt is one of those quietly effective successful real estate entrepreneurs that is totally worth getting to know.That said, Matt isn’t necessarily unique to the people I met in my first 90 days. There are Anna and Scott, Mandy, Kim and John, Michelle and Rick, Dan, Shawn and Jenn, Alfonso, Ed, Ana, Anthony, Stephen, Aaron, Jeff, Dave and Therese, Kemba, Martha, Sabrina, Kelvin, Ray, Glen, Luc, Tracy, Michael, Trish, Kory, Jeff … And, that’s only part of it, I’m sure I missed 80% of them. The point is though, that there are tons and tons of real nice people (like the ones I’ve listed above) that are 1) successful in real estate investing and 2) eager to share their wisdom. It’s an incredibly good feeling to meet with and talk to these people to hear what they have done well, to share their successes (and learning experiences) and grow with them. It’s like an extended family.It can seem a little odd though as we are often competing for the same properties, or competing for the same investors, or competing for the same working partners, or competing for the same tenants BUT, this network lives in the world of abundance.I can safely say that, if you are new or seasoned in real estate investing, one of the key contributors to your success will be the ability to find like minded people to help guide you along your path. 2 – Be patient.
There are hundreds, if not thousands of books out there about real estate investing. A common theme in most all of them is that being successful in real estate is a long-term play. Anyone who positions getting into real estate as a get-rich-quick solution is either drinking the wrong Kool-Aid or setting you up to sell you snake oil.Being patient was likely the hardest thing for me to learn. I cut my teeth in the corporate world where the way to achieve success depends greatly on finding low hanging fruit. In real estate, the low hanging fruit is cash flow and appreciation and tax savings. The key to making money in real estate is to buy right. If you want to buy right, you have to be patient. It took nearly 90 days for us to close our first deal. It was painful but I understand now that it wasn’t likely nearly as painful as it would have been jumping in and making a bad deal just to get started.A supportive network – and a great business partner – helped me contain my enthusiasm and ensure, as the next learning point outlines, that the numbers worked. 3 – Know your numbers.
Like any business, and real estate investing is a business, it’s important to understand the math behind what makes a bad deal, a good deal and a great deal. Understanding what to look for and how to evaluate a property is just a hard-skill that I needed to pick up. It didn’t take 90 days. I can now evaluate a deal’s worthiness in minutes when it took much longer in the beginning. There are metrics, like the 1% rule, and Cap rates and cash on cash return that I needed to get used to until I didn’t need to think about it and it came natural. It was also important to understand the different types of opportunities, like Turnkey, BRRR, Rent-To-Own, Wholesaling, and how the numbers relate to each of these.There are many good calculators out there and your network and a little bit of research can point you to the ones you will feel most comfortable with. There is one available on our website for Turnkey properties if you are interested. 4 – Know your market.
We made what I think is a classic mistake when my brother and I started Property Sense. We were hungry (read impatient) and were looking pretty much anywhere for deals. Him within an hour commute to where he lives in Kingston and me within an hour commute to where I live in Innerkip. Problem is, the deals are very different in each location and even within each community. Things like cash flow and cap rates just mean different things based on the area.Within the first 60 days, we realized that it was essential that we get to know communities and neighbourhood within communities expertly well. We couldn’t do that when we were looking at over a dozen small cities. As much as it may feel right to try and be all things to “all people”, it’s important to gain an intimate knowledge of the locals you will be investing. The right or wrong side of the track is important. The right or wrong side of the river is important. Get a great realtor, know your areas well and invest in up and coming areas. 5 – Create a plan.
Oddly enough, “Just Do It” just wasn’t doing it. We were working hard, doing “stuff” and “things” were happening. In retrospect, this is a classic mistake for any new business, not just real estate investing. Just shy of 90 days, we took a day to slow down and create a plan.Luckily, there are several business planning models out there and we each have experience creating them.Related: 4 Reasons Building Trust Is Harder and More Important Than Ever
We decided to follow a simple tried and true method of build a 3 year plan. Key Performance Indicators (KPIs):
These are the 3 – 6 high level goals you want to achieve. They need to be SMART. Specific, Measurable, Achievable, Relevant and Time-based. (note: some gurus define SMART differently but this worked for us). Strategies:
These are the high level initiatives that we needed to focus on to achieve the KPIs. For instance, we need a social media strategy to achieve our KPI of increasing our centers of influence. Strategies should be high-level and, they need to enable the success of one of more KPI – otherwise, they aren’t worth doing. Tactics:
Tactics are the Who (exactly) is going to do What (exactly) by When (exactly). Tactics need to be relevant to strategies. Parking Lot:
Our first 90 days created a figurative smorgasborg of great and fun ideas for our real estate investing business. When it came down to it though, if they didn’t fit with a specific KPI or Strategy, we had to consciously put them aside. As a result, we have a good list of great ideas but they will stay on the drawing board so we can focus on the must-dos to make our real estate investing business a success.Here’s an image of our 90 day strategy session that is the foundation for our 3 year plan. (image purposefully blurred so no one can steal all our great ideas)
Meet as many successful people as you can and learn from them. They are eager to share. Return the favour. We all have something to contribute to make a better community.Take your time. Focus on one market and learn it well before moving on. Understand the metrics inside out.Lastly – create a plan. Monitor and re-calibrate it at least quarterly.