When I first got the idea for this post, I thought it would be about technical items—items like a contract or lease, a marketing letter or property analysis spreadsheet. The more I thought about and outlined the article, the more it became apparent that the things newbies (and more seasoned investors) must master are a bit more complex than simple spreadsheets and contracts. In fact, what follows are items that perhaps we really never quite master, but instead that we keep learning about and trying to improve upon as we grow and become more experienced.
So what do investors need to work on mastering?
4 Areas Newbies NEED to Master For Real Estate Investing Success
Markets are cold and heartless. They do not care if you do not understand their dynamics. They do not care if don’t look before you leap, and misjudging a market can be the quickest way to crash and burn. Sounds horrible, but it has to be that way. The market quickly clears out those who make mistakes. On the other hand, the market can provide you with all you ever wanted and more. It comes down to knowing and understanding the market you plan to work in.
So where are you going to work? Can you define it? Who is buying there? Who is selling there? What are the prices it will bear? To be successful you need to master the answers to these questions or at least be able to figure out the answers very quickly. Otherwise, how can you spot potential profit-making opportunities? Mastering all of this takes time and learning. In fact, the learning never stops. Markets change all the time. This means you have to change, adapt, and relearn things as well. Always work to master you market. If you can, you will be very, very successful.
Deal analysis is one of the keys to success in the real estate investing world. You simply have to run the numbers on any potential deal. However, newbies also have to understand that some of those numbers are just a “best guess” for lack of better words. They are numbers based on past experiences. And as we know, past performance is no guarantee of future returns. But sometimes a guess is all you have. You cannot expect every number to be perfect, and you cannot expect to find the perfect number every time. If you do, you will end up paralyzed, always searching for more data before you make your first move.
This is a big one. Becoming a real estate investor means overcoming fear—a lot of fear. And there are quite a lot of things to be fearful of. There are lots of dollars that can be lost. There are the unknowns and leaps of faith you have to make. There are angry sellers who have to be negotiated with. There are contractors who have to be hired, managed, and paid. All of this and more is often very new to the first timer. That little voice in your head begins to raise doubts: “What if I get yelled at,” “What if I make a mistake,” “I can’t make such a low offer—they will never accept such a thing,” “Contractors are all crooks; I can’t manage them.” And while these all may have some validity, you have to master your fear and try.
Remember that fear is simply a reaction to the unknown. You have never made an offer, never done a rehab, never screened tenants, and never done whatever. But often the best way to get over the fear is by doing. We have all had (still have) these fears, and you will make mistakes, but I can tell you this from experience, the fear goes away and it gets easier every time. Eventually you will be able to look back and laugh at what seemed to be such big and looming fears.
Newbies (and seasoned investors), the last thing you have to master is yourselves. As demonstrated by the discussion points above, you will be entering uncharted and ever-changing waters. This voyage can be really scary, but if you do not go, you will never achieve your goals or find success. You will never realize all of the wonderful things real estate investing can do for you.
Remember, though, that it will not be easy. Do not get sold on a dream. It takes a lot of work and effort before you can successfully do this job sitting on a beach sipping drinks with umbrellas in them. You will need to master yourself. What do I mean exactly? You will need to master your time, your emotions, your money and spending habits, your personality. You may actually have to transform yourself quite a bit from the person you are today to be a successful investor/entrepreneur. It will take time, but it can be done.
I know this sort of sounds like a psychology paper, but the truth of the matter is that it kind of is. Being a successful real estate investor starts in your head. Yes, you have to learn about your market and how to analyze a deal, but you may also have to overcome psychological and personal barriers as well. We have all had to do it—are still working it, and you can too.
Have you mastered these four areas? How did you do it? What did you have to change?
Please share with your comments.