Monday, June 25, 2012
How does a new investor avoid the trap of ADD-investing, given the myriad paths to success promised by speakers at investing seminars?
Most new investors have no idea where they wish to focus; they merely want to learn how to create a passive income that will lead them to a more secure financial future. Every new real estate investing guru claims that their path to financial freedom is the surest, easiest path – and they have stats and a track record to back up their claims.
The reality is that almost any method can take you there, as long as you follow a few basic rules.
Buy right. Make your money when you buy. Buy low, sell high(er).
Understand your market. Know values.
Look for opportunities in emerging markets, paths of progress. Remember that a rising tide raises all ships.
Look for value plays. Add value to your property. Find a need and fill it. Solve problems.
Cash is king. Cash flow is better.
The course that is right for you will be the one with which you feel most comfortable or prepared to take on. Make sure that you know that there is a market or demand for the services you want to provide. Take an inventory of your own strengths and desires to begin. For example,
Do you have a job? If so, you have limited time to invest, but more opportunities to take advantage of today’s low-interest mortgage rates. Perhaps you can lend money to other investors while you are learning about investing. Perhaps you can partner with another full-time investor who can do the work, while you provide the cash or financing.
Do you have cash to invest? Good credit? Then your choices about investing will be different from those available to someone with no cash or with bad credit.
Do you like working with people? Are you comfortable with the idea of working with tenants? If so, then rental properties may be a good niche. If not, look at buying notes or tax liens as possible options. Another option may be to focus on commercial office, retail, or industrial properties. Or perhaps large multifamily properties where you will be hiring a property manager to deal with tenants.
Are you good at raising money? Social marketing? Technology? Then partner with another investor who needs these skills and take a split of the equity.
If your skill set involves a desire to work independently, then focus on an area of investing that you can do with few outside partners.
Take a good inventory of what you have to offer, what you need, and discuss this list with the investors you meet at your local real estate investing group especially if you are looking for a partner while you are learning the ropes.
Once you choose an investing strategy, stay true to the course and start implementing what you have learned immediately. Take action, make offers. Follow up. Devote concentrated effort in following step-by-step instructions from those who have been successful with this strategy. Evaluate what is working for you and what isn’t. Network with others who are doing similar types of investing and find out what is working for them. Be serious and treat your investing as a business.
Block your time during the day, so you do not get distracted by phone calls, email, social media or other distractions. Set goals for the number of offers to make per day or week. Track your progress. Celebrate your successes, and don’t get too discouraged by the setbacks. You are learning; keep going. Find someone who believes in you to serve as an accountability partner (preferably an active and successful investor).
Set financial goals and timelines, and evaluate your progress towards them. Determine what needs to be changed if you are not meeting your goals. Determine at what point in time, or what benchmark will be used to change course if necessary. How long can you afford to pursue this path if you do not achieve your goals?
And if you do decide to change course, evaluate your reasons for doing so. Having a cash reserve will allow you to sleep better at night and know that you and your family can weather any storm. If the market changes, your strategy may need to change as well. Keep up with changes in the market. And seek out mentors and coaches you trust, who can advise you when the going gets tough.
Stay true to your course, unless you are convinced that something has changed to make it impossible for you to succeed.