There are a number of ways investors can profit from real estate—joint ventures, wholesaling and property management, to name a few—but it takes a little savvy to become successful in this competitive arena. Whether an investor has a degree or not, there are certain characteristics that top real estate investors commonly possess. Investopedia, an online resource for investing of all types, offers these habits shared among all highly effective real estate investors.
1) Make a plan. Real estate investors must approach their real estate activities as a business in order to establish and achieve short- and long-term goals. A business plan also allows investors to visualize the big picture, which helps maintain focus on the goals rather than on any minor setbacks.
2) Know the market. Effective real estate investors acquire an in-depth knowledge of their selected markets. Keeping abreast of current trends—including any changes in consumer spending habits, mortgage rates and the unemployment rate, to name a few—enables real estate investors to acknowledge current conditions and plan for the future.
3) Be honest. It seems obvious, but it’s always worth repeating: Most successful real estate investors maintain high ethical standards. Real estate investing involves people, so an investor’s reputation is likely to be far reaching. Effective real estate investors know it is better to be fair, rather than seeing what they can get away with.
4) Develop a niche. It is important for investors to develop a focus in order to gain the depth of knowledge essential to becoming successful. Taking the time to develop this level of understanding is integral to the long-term success of the investor. Once a particular market is mastered, the investor can move on to additional areas using the same in-depth approach.
5) Encourage referrals. Referrals generate a sizable portion of a real estate investor’s business, so it is critical that investors treat others with respect. This includes business partners, associates, clients, renters and anyone with whom the investor has a business relationship.
6) Stay educated. As with any business, it is imperative to stay up to date with the laws, regulations, terminology and trends that form the basis of the real estate investor’s business. Investors who fall behind risk not only losing momentum in their businesses, but also legal ramifications if laws are ignored or broken.
7) Understand the risks. Stock or futures market investors are inundated with warnings regarding the inherent risks involved in investing. Real estate investors, however, are more likely to see advertisements claiming just the opposite—that it is easy to make money in real estate. Prudent real estate investors understand the risks—not only in terms of real estate deals, but also the legal implications involved—and adjust their businesses to reduce those risks.
8) Invest in an accountant. Taxes comprise a significant portion of a real estate investor’s yearly expenses. Understanding current tax laws can be complicated and take time away from the business at hand. Sharp real estate investors retain the services of a qualified, reputable accountant to handle the business’s books.