With that goal in mind, here are
some ideas for becoming a more profitable investor:
1) Surround yourself with successful investors. Real estate investing is like learning a foreign language. You are always learning and practicing. To learn a new language, you need to converse with native speakers on a regular basis. If you are studying real estate and you are primarily speaking with other newbie's, you are likely to teach each other bad habits. Find a network of experienced investors that you can interact with, learn from, and do business with.
2) If it sounds too good to be true, that’s a clue to consult your mentors before you take the next step. Although real estate investing can offer truly 'unbelievable' returns, there are also a lot of charlatans and thieves in real estate that are trying to separate you and your money as quickly as possible. If you use a knowledgeable team to help you make major investing decisions, you will be reducing some of the risks associated with investing. A good team includes investing partners as well as vendors.
3) Slow and steady really does win the race. While you can make enough profit to retire off of a single deal; virtually no one retires off of their first deal. It takes time and repeated positive experience to develop the skills, relationships and confidence to hit a home run in real estate. Nine of out ten times you'll be more profitable repeating "base hit" deals rather than going for the home run. Acquiring multiple properties over a long period of time increases your probability of success. Many investors pass over a “good” deal while waiting for a “great” deal that never comes.
4) Solving problems creatively can be a gateway to profitability. An investor gets paid when he or she creates value. This could be solving a problem with a property, applying capital in a creative way, re-purposing a property in a creative way, or solving a seller's needs in a creative way. When two people are willing to trade for what the other has, there is usually a little bit of room for the coordinator to make a profit. However, when three people have their needs filled in a triangle of events, there is usually an opportunity to make a much larger profit for the person the coordinates the flow of events/transactions. Here is an example: of a "deal triangle" where there is room for the deal facilitator to make a generous profit: There is a baker who has bread but needs corn, a farmer who has corn but needs milk, and a rancher who has milk but wants bread. A person can identify the needs and capacity of each party and then create an exchange network whereby each party gets what they want by indirectly trading what they have. The indirect trade of a "deal triangle" will result in more profit to the problem solver than just connecting two parties in a more typical direct exchange. The fewer people there are who have the capacity and willingness to solve the problem, the higher the potential reward.
5) Be prepared to identify and act on opportunities quickly. There are opportunities to make huge profits in real estate if you are willing and able to take action quickly when the opportunity presents itself. The first step in being able to move quickly on a deal is to know very clearly what you are looking for so you will recognize it when you see it. Identify your personal strengths (assets) and weaknesses (liabilities). Formulate your personal investment philosophy (financial objectives) so you can articulate as specifically as possible what a suitable investment looks like. A suitable investment is one that aligns with your resources while offering the potential to bring you closer to your financial objectives. The next step is to learn to "thin slice" deals - the ability to make quick decisions with a very limited amount of information. Experienced investors must create a balance between thorough yet speedy due diligence followed by decisive action to close a deal. You could spend years doing due diligence on a single deal, but great deals won't wait that long.
Today's guest blog courtesy of David Campbell, professional investor, developer, and founder of Hassle-Free Cashflow Investing
1) Surround yourself with successful investors. Real estate investing is like learning a foreign language. You are always learning and practicing. To learn a new language, you need to converse with native speakers on a regular basis. If you are studying real estate and you are primarily speaking with other newbie's, you are likely to teach each other bad habits. Find a network of experienced investors that you can interact with, learn from, and do business with.
2) If it sounds too good to be true, that’s a clue to consult your mentors before you take the next step. Although real estate investing can offer truly 'unbelievable' returns, there are also a lot of charlatans and thieves in real estate that are trying to separate you and your money as quickly as possible. If you use a knowledgeable team to help you make major investing decisions, you will be reducing some of the risks associated with investing. A good team includes investing partners as well as vendors.
3) Slow and steady really does win the race. While you can make enough profit to retire off of a single deal; virtually no one retires off of their first deal. It takes time and repeated positive experience to develop the skills, relationships and confidence to hit a home run in real estate. Nine of out ten times you'll be more profitable repeating "base hit" deals rather than going for the home run. Acquiring multiple properties over a long period of time increases your probability of success. Many investors pass over a “good” deal while waiting for a “great” deal that never comes.
4) Solving problems creatively can be a gateway to profitability. An investor gets paid when he or she creates value. This could be solving a problem with a property, applying capital in a creative way, re-purposing a property in a creative way, or solving a seller's needs in a creative way. When two people are willing to trade for what the other has, there is usually a little bit of room for the coordinator to make a profit. However, when three people have their needs filled in a triangle of events, there is usually an opportunity to make a much larger profit for the person the coordinates the flow of events/transactions. Here is an example: of a "deal triangle" where there is room for the deal facilitator to make a generous profit: There is a baker who has bread but needs corn, a farmer who has corn but needs milk, and a rancher who has milk but wants bread. A person can identify the needs and capacity of each party and then create an exchange network whereby each party gets what they want by indirectly trading what they have. The indirect trade of a "deal triangle" will result in more profit to the problem solver than just connecting two parties in a more typical direct exchange. The fewer people there are who have the capacity and willingness to solve the problem, the higher the potential reward.
5) Be prepared to identify and act on opportunities quickly. There are opportunities to make huge profits in real estate if you are willing and able to take action quickly when the opportunity presents itself. The first step in being able to move quickly on a deal is to know very clearly what you are looking for so you will recognize it when you see it. Identify your personal strengths (assets) and weaknesses (liabilities). Formulate your personal investment philosophy (financial objectives) so you can articulate as specifically as possible what a suitable investment looks like. A suitable investment is one that aligns with your resources while offering the potential to bring you closer to your financial objectives. The next step is to learn to "thin slice" deals - the ability to make quick decisions with a very limited amount of information. Experienced investors must create a balance between thorough yet speedy due diligence followed by decisive action to close a deal. You could spend years doing due diligence on a single deal, but great deals won't wait that long.
Today's guest blog courtesy of David Campbell, professional investor, developer, and founder of Hassle-Free Cashflow Investing
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