Success is a formula with multiple variables that play a major role in its outcome. Therefore, what is the formula for success in real estate investing?
#1. Have the Right Mindset:
Success is all about the right mindset. Many real estate investors have failed just because of the fact that they did not believe in themselves. The first thing you always have to do is wire your mindset towards success and achievement. Getting into the world of business, in general, and real estate, in particular, takes courage and careful planning. However, to be able to do so, you will have to believe in what you can do.
#2. Surround Yourself with the Right People:
Surrounding yourself with the right people comes on two levels. First, you have to surround yourself with the right people in your personal life. These people are the ones you share your stories with first. Therefore, make sure you have people around you who are willing to support you. Second, you surround yourself with real estate experts from whom you can learn. Find a real estate mentor from whom you can acquire knowledge and experience. Most importantly, make sure they also have the right mindset. Therefore, we suggest you look for the most successful real estate investors to learn from them.
#3. Learn the Fundamentals of Real Estate Investing:
Learning the fundamentals of real estate investing is a key factor in a successful real estate business. For that purpose, we suggest that you start reading real estate books, real estate blogs or even take real estate courses. With these amazing real estate resources, you can learn everything you need to know about real estate investing in no time.
#4. Acquire the Right Traits to Succeed in Real Estate Investing:
Becoming a successful real estate investor requires that you have the right traits, to begin with. The most important trait you must have is patience. Real estate investing is a process that every real estate investor should go through. This, however, requires patience. You can’t expect to start making money the moment you purchase your first investment property. A real estate investment deal takes time to find and eventually close on.
Moreover, communication and negotiation are keys to successful real estate investing. Having the ability to persuade people and communicating your thoughts to them is crucial. Closing on real estate deals requires that you have proper negotiation skills in order to get the best deals for your business.
#5. Learn What Makes for a Good Real Estate Investment:
In real estate, there is a mix of factors that make up good real estate investments. After acquiring proper real estate education, you will need to acquire experience. Only through experience, you will be able to identify what makes for a good real estate investment. So, here is a glance at the major factors that make for the best investments:
A profitable investment property:
A profitable investment property in real estate investing is one with a high rate of return. A rate of return or the return on investment is the first metric a real estate investor will have to deal with when buying investment properties. It is simply a metric that calculates the amount of return you will have on an investment property after estimating all the costs associated with it.
Another two metrics associated with a profitable real estate investment are the capitalization rate and the cash on cash return. These metrics are the ones that determine the profitability in relation to the amount of money you invest in a property. The capitalization rate, however, calculates the return taking into account the total amount of money invested. While the cash on cash return only calculates the return in relation to the actual cash you have invested.
To make it clear for you, here is an example:
You buy a property that is worth $200,000 and put a down payment of $40,000. The capitalization rate will calculate the return you will have on the total market value of the property which is $200,000 in this example. On the other hand, when you calculate the cash on cash return, you only consider the $40,000 you have put as a down payment.
A suitable investment strategy:
If you are wondering how to be successful in real estate, our answer is: begin with the right investment strategy. A real estate investment strategy that is right for you can take you a long way in your business. So, if you are a beginner real estate investor, we suggest that you start investing in rental properties. The reason we say that is because rentals are the lowest-risk investments in real estate for new investors. Starting with rental properties, you will have the chance to acquire knowledge and experience gradually. As a result, you will have a better understanding of the business and will be able to determine when to grow your business and how.
Of course, we are not suggesting that, as a beginner, you are limited to certain strategies. In fact, if you have the right education and the perfect plan, then go ahead and start wherever you feel comfortable. However, if you are lacking in the knowledge, then we do not recommend any riskier strategies such as flipping houses.
So, if there is one thing you have to know about real estate investing, that would be the higher the yields, the higher the risk. Therefore, starting small and growing gradually is the best thing that you can do until you feel more confident in the business.
A perfect location for real estate investing:
Wherever you look, you will find that location is one of the crucial factors that make for the best real estate investments. Becoming a successful real estate investor involves knowing how to find the best locations for an investment property.
Of course, you will never find a perfect location until you perform a real estate market analysis (which is another term you will have to deal with frequently). This kind of analysis is basically a form of studying the market to find the best places to invest in real estate. It is all based on comparing a number of investment properties that are similar and lay within the same location. The importance of such analysis shows up in two areas: 1) As we have mentioned before, determining the best places to invest in real estate and 2) Estimating the rate of appreciation in that area.
To learn all about the real estate market analysis in real estate investing read the blog “Real Estate Market Analysis in 6 Simple Steps“
#6. Learn from Other Investors’ Stories:
Finally, the most successful real estate investors always learn from other investor’s stories. Hanging out with successful real estate investors will automatically turn you into one. Listen to their success and, most importantly, failure stories. Learn where they have made mistakes and make sure you avoid making such mistakes. After all, we all learn from our mistakes, but the best investors learn from others’ mistakes as well.