5 Traits of Successful Investors
Monday, February 18
A lot of people are wanting to begin
investing in real estate again. They have heard the news that the market
has reached the bottom and that this could be the best market of our
generation to invest in real estate. They have heard the good news that
their still is a lot of distressed housing being sold in the form of
foreclosures and short sales and that real estate can be purchased at
One big hurdle that everyone has to get over before jumping into today’s market is FEAR. My friend Dr. David Phelps summarized 5 commons fears like this:
1. Chicken little – market is just terrible…
2. You are “Too Late” to get in for the best deals
3. Landlord “HORROR” stories
4. ALL deals are always done with banks & brokers
5. I DON’T Know how to get started
Here are some traits of the investors that are capitalizing today and making a killing investing in real estate. Each of these traits and strategies for investing will help you overcome your own fear and allow you to move forward in today’s market.
1. Eliminate Bank Financing
Bank financing is a major pain to use. Yes you can get fantastic interest rates right now, but you have to go through a huge pile of documentation, loan applications, provide copies of your leases and practically offer blood out of your right arm to get the final loan approved. You will also be asked to put about a 25% down payment on your acquisitions. How many houses can you buy if you have to keep pulling money out of your checking account for BIG down payments? NOT MANY! Besides the tough under-writing on loans, the big down-payments, there are more problems with bank financing associated with Risk. Risk with banks comes in the form of full-recourse loans and personal guarantees that can put all your assets. If you eliminate the need for bank financing, you are free to buy as many houses as you want.
2. Build private lending network with financial friends with OPM
What does it take to eliminate bank financing? There are two ways to do it. First you can get seller financing. The good news on seller financing is that it is easier then ever before to get it. Did you know you can structure your seller financing to provide you with zero interest loans? How good would your monthly rental cash flow be if you did NOT have to pay any interest? The second way to eliminate the need for bank financing is using OPM (other people’s money) by jumping into the world of private lending. Millions of people are struggling to figure out what to do with their investment accounts. They are tired of losing in the stock market and tired of earning less than out inflation rate in Certificate of Deposits (CD’s). As real estate investors, we have the best solution to offer which is investing in local real estate assets using joint ventures. It is the ultimate winning combination.
3. Invest in assets
Everyone has choices to make with their time. You can work for income with a job or even earn a high self-employed income as a paid professional (i.e. Attorney, Physician, etc). The other option is to invest for the long-term in assets. Would you invest your time now for many future paydays innet worth in the form of net worth, equity and monthly cash flow? Another trait of highly successful real estate investors is that they invest for the long term buying rental properties. Buying and holding rental properties creates a nice positive monthly cash flow while tenants pay down the debt on the purchase. In today’s market, houses can be purchased cheap and rented high. We are buying houses at prices from the 1990?s and renting them at rental rates from 2012. That is an easy formula that leads to success for real estate investors!
4. Buy houses based on numbers, not emotions
A lot of new investors get caught up in the emotions of a house. They see the property with elements such as historic charm and character and then they know they can restore it to it’s former glory. Let me caution you on this using this approach when buying investment real estate. There are some very important numbers that you MUST know before committing to buy, here are some of them:
Value in as-is condition, Value after-repairs, Market rent and monthly net cash flow
If you focus on these numbers you will find success by leaving your emotional ties to a house or neighborhood behind you. Think and Act like an investor and not as a home owner when buying investment real estate.
5. Invest in yourself first
Are you with me on these first 4 traits of highly successful real estate investors? I hope you are ready to move forward with your own plan to create cash flow and build your long-term net worth. Where a lot of investors fail is they do not invest in themselves. Personally, I am a lifetime learner and that is the 5th trait of being highly successful. You need to commit to invest in yourself first. Take time to read as many real estate investing books as you can, take time to read some of the excellent real estate investing blogs and take time to invest in real estate investing training.
Where can you learn and invest in yourself? How about right here in the BP Forums! There is a wealth of knowledge sitting here for you.
Jim Ingersoll - Investing Now Network
Real Estate Entrepreneur, Author and Coach