Why Most Real Estate Investors Fail
No one ever starts as a real estate investor expecting to fail. Popular quotes like “Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” – Franklin D. Roosevelt, President of the U.S. and “Buying real estate is not only the best way, the quickest way, the safest way, but the only way to become wealthy.” – Marshall Field, an entrepreneur have only served to entrench the popular narrative that chance s of failure are minimal if any at all.
Facts, however, tell a different story in that it is said that the failure rate of real estate investors in the United States is at a peak of 95%. This almost predicates failure for anyone starting off in this sector but there are proven strategies that have helped investors defy the odds and emerge with success and fledging careers. Here are 5 basics that have worked for many who now enjoy prominence in this sector and the same can work for you.
1. Gaining Practical Knowledge
Like in any other career, knowledge is both power and potential. Without it, you will only be setting yourself up for failure. A college diploma or degree is a great asset. It will have prepared you with all the theory you need to succeed but that goes as far as your final test or exam. Succeeding as a real estate investor requires a mix of both theoretical and practical knowledge. It is advisable to take time and learn from those already in the market through either internship or voluntarily before starting out on your own. The internet can also be a great source of practical experience as many have penned down their experiences and their routes to success or failure. Here, you will learn the art of identifying great deals, how to down due diligence and practice on deals closing.
2. The Virtue of Patience.
Most real estate investors join the business expecting to rake in huge profits within a short time. Reality is in most cases to the contrary. Most of those successful real estate investors have had to endure multiple low seasons before hitting the jackpot. Real estate has its low and high seasons and you must be tenacious enough to hold on in the tough times looking for the upturn. Experienced investors have learned this and they spend low seasons scouting for turnkey properties that have potential for a high Return on Investment (ROI). Such properties when offloaded back into the market on peak seasons can fetch money enough to cover for losses incurred when the market was depressed.
3. Finance management skills
Real estate is about money though the subject of trade is property. The ability to put your money in the right place and in the right proportions is one of the qualities of a smart investor. Newbies and less experienced investors find themselves unable to fund good deals because they overcommit without looking ahead of the business curve. Smart investors always have a buffer or a reserve fund that is never depleted and it serves them when “that deal” is finally found. For a new investor, consulting a fund manager might help check these excesses to help keep the finance options open for new opportunities. The other option is to work with a financier who can offer a low cost line of credit in times of need. The bottom-line is the understanding that your main business is working with money, through time and property in order to make profits.
Any investor makes money if they can buy when the market is low and sell when it’s high. In real estate, these levels are not only determined by current market situations but also future outlook. An investor needs to be able to determine factors that can trigger appreciation or depreciation of property in a given location and act in good time in order to make money. Information about a major infrastructure project coming up in a low cost area should trigger a decision to buy early enough to soon sell at a premium. Those who buy in late in the day end up either losing out on price or being unable to offload when they need to. A good investor will also know when to hold for a longer time especially for properties with a high potential for appreciation. A huge appreciation can offset losses incurred by holding for a long period andstill end up in profits.
5. Grow your property value
Great value and high earning property needs close attention in order to retain the value for long. Some investors have a tendency of neglecting their best performing assets leading to stagnation in revenue. A good thing can be made better if it is given the right attention. Investors need to have plans to grow the value of their properties by continuously investing in upgrades and improvements. Remember, the competition will always try to offer a better or equivalent quality to try and dislodge you from your leadership position.
You don’t have to fail because 95% others failed. Be the 5 % that defies the current and sets standards for the rest.