by Julie Broad
Sometimes a search through your bookshelf is like a treasure hunt. As I plucked Stephen Covey’s 1989 Seven Habits of Highly Effective People from my shelf, I believe I found some long lost gold. Flipping through the yellowed pages, I soaked in some of the long forgotten golden nuggets the book contains, and I pondered what the seven habits of a highly effective real estate investor would be.
I personally believe that the habits of a successful real estate investor are not particularly exceptional. I think that any person that wants to become a highly effective real estate investor can become one if they set their mind to it. Here is what I think the seven habits would be:
Habit One: Know Your Goals
The majority of the real estate investors I know set out with a goal in mind. I know a man that started investing by selling his house to buy two lots, on which he built a townhouse complex that had 8 units. Since then, he has started his own company and is building and selling hundreds of homes in Toronto every year. So, in this case, it shows how some goals may be simple, but can lead to much bigger things. Or, if goals are large they should be broken down into numerous shorter term goals.
Habit Two: Make Your Money when you Buy
It’s very risky to pay over market value for a property in the hopes that the rent will go up, the area will improve, and/or the property’s value will increase. The simple formula for long term success in real estate is to buy a desirable property below market value, in an area with a lot of potential for future growth.
Habit Three: Hire Help
Unless you plan to handle everything involved with the ongoing maintenance of a property, you should plan to hire a property manager. You may also want to hire an accountant to do the bookkeeping and the taxes related to your real estate investments. Additionally, a real estate agent is also someone you will want to find to help you in your ongoing quest to find properties to purchase. It shouldn’t be hard to find one that will understand your goals and will work with you to achieve them.
Habit Four: Use Just the Right Amount of Leverage
Leverage is a word you hear very often in real estate investing. Simply put, it’s when you put less money down on a house then the house is worth. For example, if there is a $100,000 house you want to buy, you can put in $10,000. If that house then makes $5,000 a year, you have recouped half of your initial investment. But if you put $100,000 down on that same house, then you’ve still only recouped 5%. The bad news about leverage is the amount of risk involved. That $100,000 house could drop and only be worth $90,000 or $80,000. Then you would be in the position of owing more on the house than it’s worth.
Habit Five: Find Good Partners
If you are starting out in the world of real estate investing without a lot of money, it’s hard to reach your financial goals if you aren’t willing to enter into partnerships with others. Your partners could be a family members, friends, colleagues, or even companies. I enjoy hearing success stories where someone with no money of their own enters into a contract on a property, but know they can make it happen by partnering up with another investor. My husband and I are millionaires from our real estate investing, thanks in great part to some of the partners that contributed equity to our investments along the way. Without them, we would likely only own half of the properties that we currently own today.
Habit Six: Be Persistent
When starting out in real estate (or even when you’re established) you’re going to hear the word “no” a lot, so make sure you don’t stray from your goals. Some of the people you could hear “no” from are as follows:
– Potential partners that are not able or not willing to get involved with a deal,
– Banks- banks can be very picky when it comes to lending money. This means you might have trouble with financing and other lending issues,
– Family – parents are the most likely place to start. You may often be turned down, but when they do say yes, interest rates will probably be pretty low,
– Insurance companies – so few companies want to deal with out of province landlords and it seems like we’ve been turned down by nearly every company in Ontario where some of our properties are located (we live in British Columbia),
– Property Managers – sometimes the Property Management company you want to hire isn’t interested in managing your property.
But even when we’ve been turned down by all of the above at some point or another, we don’t lose sight of our goals and keep pushing forward.
Habit Seven: Research – Always be learning
– The best investors are the ones that ask a lot of questions, keep their eyes open for new opportunities and do a lot of research. Many get right into the details of a city. They go to the municipal offices and pull the official plan. They get zoning details and applications. They talk to the city councilors about plans, they attend city council meetings and know everything that is happening in an area.
Not every good investor I know possesses every one of these habits. And I know there are habits that many good investors have that I haven’t covered. But as I thought about the most effective and successful investors that I have met or read about, I realized that almost all of them did possess each of the above habits. And, that anyone could really do what they did if they set out to establish these habits and practices in their real estate investing.
About the Author:
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