This is a summary of the article by David Green (from Nov 18, 2018) published in Forbes magazine called “The Top Seven Traits Of A Successful Real Estate Investor“
I decided to make a short summary of the article for myself:
Knowing what drives the markets and how to recognize when, where, and what to buy, sell, or hold, to maximize profits or minimize risk. David recommends spending time becoming experts on the following topics:
- Property cash flow analysis
- Recognizing under-valued properties quickly
- Accurate estimation of rehab costs
- Economic factors that drive a market
- Everything that goes into owning rental property (property management duties, etc)
Avoid establishing arbitrary goals (like buying 1 property every 2 months) that you then have to rush to meet. If you are in the wrong phase of the market cycle, wait until the winds are fortuitous. Act based on what the numbers and the market tell you, and do not give up to internal or external pressures.
Here David mostly talks about the ability to see potential where others see none, and ways to add value to properties. He gives the following examples:
- Adding bedrooms to a house in a house with less than three
- Adding bathrooms to a house with less than two
- Adding square footage cheaply. Often by converting carports, Florida rooms, efficiency rooms, or covered storage areas to make them part of the property
- Buying properties with strong bones that need cheap cosmetic upgrades
- Buying income property and increasing the rents
- Buying commercial property and decreasing the expenses
Look for things that you do every day that eat up time, eliminate distractions. Do not answer every email or take unscheduled phone calls. Demand efficiency from contractors.
Focus on things that contribute to the bottom line. Use 80/20 rule to identify 20% of activities that bring you 80% of profit, and hire support people to do the rest for you. Narrow your focus rather than expand it, and make sure that it is reflected in your business plans.
6. Relationship building
In fact, most successful investors consider relationship-building to be their 20% success factor. They buy nice homes, yachts, play golf and do other social things to get connected with other people with money. They also try to see how they can add value to other people whom they need to move forward.
7. Use of leverage
Money: Successful investors learn how to use OPM in order to scale up
People: using other people to be able to focus on the 20% that makes them the most return, and leveraging others to do the rest
Opportunities: Using every win to create the next win, leverage current success to bring the next opportunity. Your investors like repetition.