There is money to be made in real estate. If you are reading this,you are most likely aware of its massive potential. Many new investors only see the upside, but fail to see the steps needed to get to that point. One of the things that makes investing so great is that anyone can do it. There is no license or certificate needed to get started. Anyone can find a deal that they can knock out of the park. The key is knowing that this is the exception rather than the norm. If you look at the business with a get rich quick frame of mind, you will be out of it in no time. If you want to be part of the world of investing for the long term, you need to change your mentality. Here are some questions you need to ask yourself before you make any big business decision.
- Where do I want my business to be in one year? This sounds like a simple enough question, but many investors cannot answer it. Regardless if you are closing a deal a year or a deal a month, you need to have a plan. It is also important to treat your investing path like a business. If you only look for home runs on every deal, you will be waiting a long time. The best investors are those that hit singles throughout the year. Sure, there is the occasional grand slam, but this takes a perfect storm of things to happen. By focusing on where you want your business to be, it will help you make better decisions in the present.
- Is this going to set my business back? All it takes is one bad decision to change your business. There is risk in every deal. If the reward isn’t there, you need to move on. What most new investors don’t understand is that they can lose money if they are not careful. This usually isn’t the case with seasoned investors because they know all the risk associated with every deal. New investors that only look at the bottom line don’t see what it takes to get there. They end up taking chances on deals that are doomed to fail. If you do this enough times, you will miss out on the deals that can make real money. By constantly taking two steps back and one step forward, you will end up going nowhere.
- Will this hurt my reputation? Chasing the quick buck often leads to making poor decisions. If you love the business and want to stay in it for the long haul, you need to protect your reputation. In operating in the gray area, people will stay clear of your business. You may make money on one deal, but at what cost? People that know the business will not want to work with you again. You will lose the benefit of the doubt on offers and referrals. Your network and the people around you are the best source of leads you will find. If you damage your reputation to the point that nobody wants to work with you, your business will suffer. People like to work with those that they feel comfortable with. By making decisions based only on closing the deal you are working on, you can bet they will not work with you again.
- Can I replicate this deal? The best deals often happen when you aren’t expecting them. It is no secret that the foreclosure and short sale market let to some great deals in past years. Many investors made large profits in these areas. One of the reasons for this was because they had built up contacts and had saved cash to take advantage of the market. What may be a great deal is usually the cultivation of months of hard work. Before you put all your eggs in one basket, it is important to ask yourself how many deals do you expect. If you got the deal you are working on from a friend of a friend, it is unrealistic to think this will happen again. This could be a home run deal, but not one that you can build your business around.
- What was your takeaway? Every deal you get involved in is a learning experience. Most investors are so occupied with the next deal that they fail to see it. The sooner you can evaluate what works and what doesn’t, the better investor you will be. It is important to take time before, during and after every deal to make notes throughout the process. In going from deal to deal, you are bound to repeat mistakes. You should be able to find thirty minutes a week to see what you can improve on. If you know what you did wrong, you decrease the chances that it will happen again.
With the right work ethic and frame of mind it is possible to be in the real estate business for years. There is no such thing as an overnight success. You can get lucky on a deal or two, but success takes years of hard work and education. Every investor experiences peaks and valleys with periods of time where the business is frustrating. If you make decisions about what’s best for the long haul, you will start seeing more deals fall on your lap.