We interviewed two real estate experts and in this article outline their top tips for achieving success as a real estate investor.
To help you navigate the world of real estate investing, we have compiled a list of tips from some of the most successful real estate investors. From having a solid plan and realistic expectations to building a great team and staying on top of your finances, these tips will help you achieve success in the world of real estate. Whether you're a seasoned investor or just starting out, these insights will provide you with valuable guidance and advice to help you achieve your financial goals.
In our recent podcast episode, we interviewed two guests, Brandon Hall and Sharon Lechter. And it quickly became apparent that both of them attribute their success - in part at least to having the right mindset.
Sharon Lechter, co-author of Rich Dad Poor Dad and author of a number of best-selling financial literacy books, a real estate investor and financial advisor talked about her early years and the way money was openly discussed amongst her family. She grew up understanding concepts like depreciation and investment strategies which gave her a huge advantage at that age, an advantage she’s determined to share.
Brandon Hall, CEO of The Real Estate CPA, and Inc 5000 company and real estate investor said, “The first step to understanding real estate investing is recognizing that it is a business.” This means treating it as such, with a strategic plan, careful budgeting, and attention to detail. Real estate investing is not as complicated as it may seem, but it still requires a solid understanding of the market and the ability to adapt to changing circumstances.
Furthermore, Lechter’s quote, "I've been in real estate a very long time and obviously I've made a lot of mistakes, but I don't call them mistakes, I call them learning opportunities," underscores the importance of having the right mindset when it comes to investing in real estate. You need to be open to learning from one's mistakes and failures, rather than viewing them as setbacks. This attitude can be critical to success in real estate investing, as it allows investors to be resilient, learn from their experiences, and continuously improve their strategies.
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Many people enter real estate with false beliefs that it’s a passive asset. When it comes to real estate investing, having a well-thought-out plan and realistic expectations are crucial for success. While, as CPA and real estate investor Brandon Hall emphasizes, "Everyone should own real estate because it’s a great asset class.”
He also stresses that it takes consistent work and commitment explaining "I’ve seen people jump into real estate only to realize it’s not passive like social media influencers would love for you to believe, and then think I need to liquidate this."
Before investing in real estate then it's essential to create a solid plan that includes realistic goals, a clear investment strategy, and a comprehensive understanding of the market. And finally, you have to be ready to put the work in to succeed.
Having a solid team that you can rely on to assist you with the areas you’re weakest will help you ensure you avoid common pitfalls, maximize revenue, and ultimately achieve your long-term financial goals.
As Brandon Hall notes, "A lot of the clients we work with struggle when building a team. They know how to manage professionals, but when you move into real estate it’s a completely different ball game - you need to know how to build a team." In real estate investing, having a team of professionals with expertise in different areas can make all the difference.
Sharon Lechter agrees saying, "One of the most important things is building that team. Don’t assume you know everything there is to know about real estate." It's crucial to recognize that real estate investing is a complex and multifaceted endeavor that requires a variety of skills and expertise. As Lechter adds, "The people that succeed are the people that find the right people to support them. The right management person, the right accountant and tax person."
When it comes to finding a good CPA or accountant, Lechter advises, "Ask them how many real estate clients they have because you want to make sure they’re not learning on your dime." It's crucial to work with professionals who have extensive experience in the real estate industry and can provide valuable insights and guidance.
In addition to accountants, real estate investors should also seek out other professionals such as lawyers, property managers, contractors, and real estate agents. Building a team of experienced and knowledgeable professionals can help investors make informed decisions, minimize risks, and maximize returns.
Successful real estate investors will often gain a comprehensive understanding of their targeted markets. This involves narrowing down their focus to specific geographic areas and deciding whether to invest in residential or commercial properties, short-term rentals or land.
It’s also important to stay on top of current trends, including shifts in consumer spending patterns, mortgage rates, employment rates, demographics of your chosen area, and more. By doing so, they can anticipate when trends might shift, creating favorable opportunities for investors who are prepared.
Real estate investing is ultimately a numbers game. You want to identify an asset that will increase in value over time and produce some income in the meantime in cash flow. However, it’s not enough to just find and analyze great deals. The real work only truly begins once you’ve closed on the deal.
Rentals are a business and as Sharon Lechter told us, "You have to be aware of what’s going on. What I see a lot of people doing in real estate is they buy it, hiring a management company, and then they forget about it. They take their finger off the pulse." The result, Sharon said, is almost always a drop in profits. "One of the things we’ve learned along the way is when I’m looking at the numbers I’ll think, something doesn’t look right. And this means I’ve got to have a conversation with the property manager to find out they’ve started adding this upcharge without talking to us. And those are the kind of things that can slip through if you’re not paying attention," and really impact your business.
Brandon Hall echoes this sentiment, adding, "Our most successful landlord clients are the ones in small partnerships,” because with this setup “somebody's going to ask about the finances on an ongoing basis."
Ultimately, while not the sexiest part of investing, staying on top of your finances, tracking expenses, and identifying potential issues early on can help prevent costly mistakes and ensure the long-term success of your investments.
For many investors, their real estate income is small in comparison to their day job, and because of that it can become a bit of an afterthought. However, as we’ve already mentioned, real estate investing requires a significant amount of time, effort, and attention to detail if you want to make your investments work as hard as they could be. As an investor, it's crucial to focus on your properties and prioritize your time accordingly. This means making time to regularly assess your properties, maintaining good relationships with tenants to keep vacancy periods down, meeting with your team, and staying up-to-date on market trends.
As Brandon Hall notes, "If you're becoming a landlord at a point in your life when you don't have time to focus on your properties, then you need to be okay with not making nearly as much money as you could have during that period."
For investors with limited time then Brandon Hall suggests keeping it simple. Focus on a single asset class (at least to begin with) to minimize the amount of work you need to do. But you also need to make sure you’re giving yourself the time to manage your properties properly.
Real estate investing can be a complex and nuanced field, and it's essential to educate yourself before diving in. As Sharon Lechter notes, "You need to educate yourself, you need to know your numbers, and you need to understand them and be able to react accordingly."
This education can take many forms, from reading books and articles on real estate investing to attending seminars and networking events. It's also essential to learn from experienced professionals in the field and seek out mentors who can provide guidance and support.
A few areas to think about expanding your field of knowledge include:
By educating yourself on all aspects of real estate investing, you can make informed decisions and avoid costly mistakes. With the right knowledge and expertise, you can identify opportunities, mitigate risks, and maximize the return on your investment.
Real estate is a flexible asset and it’s well worth thinking laterally about new ways to potentially create new income streams. As Sharon Lechter notes, "There are always ways to increase cash flow. In times of crisis, you need to get creative and curious."
One way to do this is by thinking outside the box and exploring unconventional uses for your properties. For example, as Sharon Lechter shares, one of her clients parked an RV on her property and is now making money from it.
Finding new and innovative ways to use your properties to generate income could involve exploring different types of rental arrangements, such as short-term or vacation rentals, or exploring alternative uses for your properties, such as turning them into co-working spaces or event venues.
By exploring these less conventional uses for your properties you may very well be able to unlock a brand new source of wealth.
Using comprehensive software like Landlord Studio can help real estate investors streamline their property management tasks, freeing up more time to focus on building your portfolio and exploring creative ways to increase cash flow. With the ability to easily track expenses and income, investors can better understand their property’s performance and make informed decisions about how to improve their returns.
Successful real estate investing requires careful planning, realistic expectations, building the right team, knowing your numbers, staying focused, being creative, and using the right tools. As noted by the experts, treating real estate investing like a business is crucial to achieving success. This means being organized, outsourcing where necessary, and ensuring that you stay on top of your finances and property management. As Brandon Hall rightly pointed out, failing to get organized could result in being buried in admin work, which could cost you time and money.
“Real estate being a business - if you’re an unorganized person you need to sort that our at the beginning. You need to outsource accounting, you need to outsource your admin, you need to do something” because “the admin work will bury you,” said Brandon Hall.
So, if you're looking to invest in real estate, take these tips from successful real estate investors, and approach it with the same level of attention and care as you would any other business venture.