What is most important when starting out?
Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes
If your son or daughter came to you seriously wanting to learn to invest in real estate, what skills would you recommend they develop and how might you suggest they develop them?
There are many skills that can help a real estate investor be successful, I curious what members might consider to be some of the most important and how they could be learned.
There are many ways to invest, so it might be useful to identify the type of investing as well.
Regardless of how you invest in real estate good negotiating skills will go a long ways in helping a real estate investor.
Great topic! A few initial things that come to mind (in no particular order):
1) Money management skills and the ability to live below your means. A person that lives below their means and has their own financial house in order is going to be far less likely to make reactive decisions.
2) Patience/Discipline - being able to work towards a long term plan and not expecting to get rich quick.
3) People Skills - being likeable, outgoing, etc. Listening skills are big in my opinion. Each time I've met a person in some part of the business, they've always passed on lots of advice and stories. Oftentimes, I will already know a lot of it. In those cases, there is a real temptation to tell them you already know that - especially, as a new investor you want people to know that you know your stuff. I always make myself shut up and listen, regardless of how much I know of what they are telling me. Saying "I already know that" will kill the conversation, and even though you may know a lot of what they are telling you, oftentimes you will still pick up some new nugget or subtlety that you didn't know, or they may conclude that part of the conversation by giving you the business card of someone they have worked with for 25 years and trust explicitly.
4) Managing emotion. As much as people will tell you to think with your business head and not your emotions, there will be emotions. The trick for me has not been avoiding them, but managing them when they do jump in and want their say.
5) Basic accounting skills and the understanding of the types of costs associated with a real estate investment.
6) Research/Evaluation skills. Knowing how to evaluate a deal, research an area, get comps, etc, etc.
7) Ability to put yourself in another person's shoes. For example, if you are looking at a potential rental property, it's important to try to put yourself in a potential tenant's shoes and ask yourself if you would want to rent that property.
8) Gut/hunger to learn. Trusting your gut, but realizing that your gut comes from having a critical mass of knowledge to draw from in order for those gut feelings to pop out of seemingly nowhere. So obviously, you've go to have a hunger to learn and passion in order to learn absolutely everything you can.
9) Scalability of the business. How can I do the things I'm doing now for my couple of properties in a time effective manner when I have 10?
10) Attention to the small costs. That "little" extra $40/month because you didn't shop around for insurance could easily amount to 25% or more of your cash flow. Then multiply by x properties!
That's what springs to mind right now - we're only two properties into our journey, so I'm sure these thoughts will be a lot more refined further down the road.
Charles,
Great question...
While there a million things going through my mind... I think the skill that is most critical is to learn how to become a "problem solver".
Pete
Pete, I can see how the ability to problem solve would able to all types of RE investing. What they you can count on is the unexpected.
How might someone teach the problem solving skill? Some of it is common sense that comes with time, but critical thinking abilities and the ability to find solutions can make an investors life easier.
Since there are so many ways to invest there could be many answers but all of them will require both people skill and analytical skills.
You will always have to be able to crunch the numbers, after all this is investing, so being able to tell what numvbers you need and how to come up with them will be key.
People skills because you will need to deal with all of them whether sellers, buyers, contractors etc. Being able to communicate effectively by knowing how to listen, seeking win-win agreements, and developing the BS meter will serve them well.
Lest not forget education, education, education! Always be on the lookout to learn, this should never stop.
If I were to start teaching my kids, first they would get the basics along a formal real estate education. Then we would look at the strategies.
I think that a big problem that new investors might have is that they don't do a really good personal inventory or assessment of thier skills, personality and education. Not everyone can be successful in all strategies. Fitting themselves in the right startegy.
As Peter mentioned, being a problem solver is just an absolute requirement if you are going to flip properties, thinking out of the box is very hard to teach, those that have a natural out of the box approach to any deal and have a good RE knowledge will be much more successful than the guy who strugles finding deals. Making a property a deal is key, seeing the right possibilities. Being a landlord can be a whole different skill set.
They will need a basic financial knowledge as well, a good understanding of market analysis and construction issues. Understanding the intent of regulations and applicable laws can is a big deal in RE. Compliance issues are not just to the letter of they law as there are many gray areas
That's where I'd start....
Great Question Charles,
I have to be an advocate of at least the 1st book in the Rich Dad/Poor Dad series (Rich Dad/Poor Dad) My partners and I all started with this basic foundation of education as an introduction of the basic principles of Assets vs. Liabilities, true definition of 'Cash Flow', and the practiality of understanding your true costs vs your true expenses (again- Assets and Liabilities) Understanding basic fundamentals of truly "Cashflowing" $100 per rental property when you have 10 properties at that rate will get anyone's attention as to the basic powerful principles of Real Estate Investing.
Easy to read and understand, I found this book was perfect for introductions into the Real Estate Investing game but you'll have to seek further sophisticated knowledge as you begin to search for and close deals.
Hope this helps!
Patrick
Great topic! A few initial things that come to mind (in no particular order):
1) Money management skills and the ability to live below your means. A person that lives below their means and has their own financial house in order is going to be far less likely to make reactive decisions.
2) Patience/Discipline - being able to work towards a long term plan and not expecting to get rich quick.
3) People Skills - being likeable, outgoing, etc. Listening skills are big in my opinion. Each time I've met a person in some part of the business, they've always passed on lots of advice and stories. Oftentimes, I will already know a lot of it. In those cases, there is a real temptation to tell them you already know that - especially, as a new investor you want people to know that you know your stuff. I always make myself shut up and listen, regardless of how much I know of what they are telling me. Saying "I already know that" will kill the conversation, and even though you may know a lot of what they are telling you, oftentimes you will still pick up some new nugget or subtlety that you didn't know, or they may conclude that part of the conversation by giving you the business card of someone they have worked with for 25 years and trust explicitly.
4) Managing emotion. As much as people will tell you to think with your business head and not your emotions, there will be emotions. The trick for me has not been avoiding them, but managing them when they do jump in and want their say.
5) Basic accounting skills and the understanding of the types of costs associated with a real estate investment.
6) Research/Evaluation skills. Knowing how to evaluate a deal, research an area, get comps, etc, etc.
7) Ability to put yourself in another person's shoes. For example, if you are looking at a potential rental property, it's important to try to put yourself in a potential tenant's shoes and ask yourself if you would want to rent that property.
8) Gut/hunger to learn. Trusting your gut, but realizing that your gut comes from having a critical mass of knowledge to draw from in order for those gut feelings to pop out of seemingly nowhere. So obviously, you've go to have a hunger to learn and passion in order to learn absolutely everything you can.
9) Scalability of the business. How can I do the things I'm doing now for my couple of properties in a time effective manner when I have 10?
10) Attention to the small costs. That "little" extra $40/month because you didn't shop around for insurance could easily amount to 25% or more of your cash flow. Then multiply by x properties!
That's what springs to mind right now - we're only two properties into our journey, so I'm sure these thoughts will be a lot more refined further down the road.
Glad to see responses from newer and older investors. I have agree that people skills in general are important. Any suggestions how you teach good people skills such as active listening, good conversational skills, negotiating win-wins, etc. I also have found it is important to be able to read people again this is a skill that is hard to teach.
Some of you have touched on the ability to analyze what a good deal is. There are many things to consider here, but IMO this is far easier to help someone to learn. Perhaps its my mindset.
Like Bill said, I agree that understanding real estate fundamentals is important as well. It sure helps to know something about contracts, encumbrances, financing methods, etc.
These are all great replies. I like the idea of walking before you run. Understand the "why". Why do you want to invest in real estate? Imagine where it will all end, then learn to think backwards and determine each step along the way. Eventually, you'd find the place where you feel good about taking that first action step.
Wow...great reply Harry!
I am a stickler for knowing the numbers and how the numbers change when you hold property in a portfolio. That would be tops on my list.
Negotiating skills, basic business skills, and building credit would all be important too. Contract law and partnership/syndication law are important too IMO...especially if you plan to scale to larger projects.
As a numbers person myself, I would agree that the ability to analyze and make sense of financial information, markets and other numeric factors affecting an invest is important. An investor needs to make sound financial decisions sometimes very quickly.
From my stand point teaching numeric skills is easy.
Beyond people skills, negotiating skills, deal analysis skills what other important skills can help investors getting started and how might someone learn these important skills?
Are there skills that might are tough to learn that you either have or don't?
Of course there skills specific to different investment strategies.
I would say to be sure that you manage your expectations.Don't underestimate the amount of hurdles that can stand in your way. Be realistic, but don't be paralyzed , be willing to learn and to UNlearn. read a lot of books about the subject that interest you most - flipping, wholesaling, birddogging, managing, buying/selling paper , auction or whatever floats your boat. don't be afraid to ask questions and ask a lot of them. Above all, I think the best thing a beginner can do is to find a mentor - there is almost nothing that can substitute for having a mentor to lean on and learn from. If you had to focus your energies on one thing , I would say focus on how to find a mentor - the time spent will more than pay for itself if you find the right one.
It is my desire one day to mentor my grandkids. Children and grandchildren don't always want to follow in your steps. My children lead professional live and could care less. It is my hope to teach my grandkids about real estate they are to young right now to care, but maybe later.
Part of what I was hoping to get out of this conversation was what skills are important to teach to beginning investors especially family. I think many have touched on key considerations.
Determination is certainly an important aspect. An investor needs to be willing to dig and hear the word "no" many times. There are deals that can be negotiated and some that you just walk away from. Knowing your market can make it easier to know what the magic number is and knowing the numbers can tell you if it makes financial sense. Knowing the right people lets you have the tools and finances that you need to get it done.
There are many practical skills that investors should have, so can they all be taught? What other skills can you think of that should be taught?