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The Seven Habits of Highly Effective Real Estate Investors

Todays Date: December 15, 2018

Sometimes a search through your bookshelf is like a treasure hunt. As I plucked Stephen Covey’s 1989 Seven Habits of Highly Effective People from my shelf, I believe I found some long lost gold. Flipping through the yellowed pages, I soaked in some of the long forgotten golden nuggets the book contains, and I pondered what the seven habits of a highly effective real estate investor would be.

I personally believe that the habits of a successful real estate investor are not particularly exceptional. I think that any person that wants to become a highly effective real estate investor can become one if they set their mind to it. Here is what I think the seven habits would be:

Habit One: Know Your Goals

The majority of the real estate investors I know set out with a goal in mind. I know a man that started investing by selling his house to buy two lots, on which he built a townhouse complex that had 8 units. Since then, he has started his own company and is building and selling hundreds of homes in Toronto every year. So, in this case, it shows how some goals may be simple, but can lead to much bigger things. Or, if goals are large they should be broken down into numerous shorter term goals.

Habit Two: Make Your Money when you Buy

It’s very risky to pay over market value for a property in the hopes that the rent will go up, the area will improve, and/or the property’s value will increase. The simple formula for long term success in real estate is to buy a desirable property below market value, in an area with a lot of potential for future growth.

Habit Three: Hire Help

Unless you want to take on a few extra jobs when you buy a property, I suggest that you think about hiring a property manager, an accountant and a real estate agent. The property manager can do repairs to the property and collect rent. The accountant can do your bookkeeping and yearly taxes, and the real estate agent can work with you to find more real estate investment properties. Just make sure that the people that you hire are trustworthy and will help you achieve your goals.

Habit Four: Use Just the Right Amount of Leverage

Serious real estate investors use leverage to get what they want. If you keep buying property with cash every single time, even the richest person in the world will soon run out of money. Leverage is when you invest a small amount on a much bigger amount. In other words, it’s possible to put $10,000 down on $100,000 house. If that house makes $5,000 a year, then you ROI ( return on investment) would be 50%. If you had paid for the whole $100,000 up front, then the return would still only be 5%. However, the downside of putting a small amount down is that it does not protect you from fluctuations in the market. If that same house drops to $90,000, you can wind up owing more on that home than the property is worth.

Habit Five: Find Good Partners

If you are starting out in the world of real estate investing without a lot of money, it’s hard to reach your financial goals if you aren’t willing to enter into partnerships with others. Your partners could be a family members, friends, colleagues, or even companies. I enjoy hearing success stories where someone with no money of their own enters into a contract on a property, but know they can make it happen by partnering up with another investor. My husband and I are millionaires from our real estate investing, thanks in great part to some of the partners that contributed equity to our investments along the way. Without them, we would likely only own half of the properties that we currently own today.

Habit Six: Be Persistent

When starting out in real estate (or even when you’re established) you’re going to hear the word “no” a lot, so make sure you don’t stray from your goals. Some of the people you could hear “no” from are as follows:

– Potential partners that are not able or not willing to get involved with a deal,

– The banks – on just about every deal we had trouble getting financing and had to deal with multiple lending issues,

– Family- we’ve asked numerous family members to become our investment partners and are more often than not turned down. But it never hurts to ask, as family members will give better interest rates than the banks,

– Insurance companies – if you don’t live in the same province as the property you are trying to insure, most insurance companies don’t want to do business with you. We have approached and been turned down by numerous insurance companies that won’t insure our Ontario properties because we live in British Columbia,

– Property Management Companies – it’s possible that the property management company that you would like to hire doesn’t want to manage your property.

But even when we’ve been turned down by all of the above at some point or another, we don’t lose sight of our goals and keep pushing forward.

Habit Seven: Research – Always be learning

– The best investors are the ones that ask a lot of questions, keep their eyes open for new opportunities and do a lot of research. Many get right into the details of a city. They go to the municipal offices and pull the official plan. They get zoning details and applications. They talk to the city councilors about plans, they attend city council meetings and know everything that is happening in an area.

Not every good investor I know possesses every one of these habits. And I know there are habits that many good investors have that I haven’t covered. But as I thought about the most effective and successful investors that I have met or read about, I realized that almost all of them did possess each of the above habits. And, that anyone could really do what they did if they set out to establish these habits and practices in their real estate investing.

Learn How to Retire a wealthy real estate investor with Julie’s free Real Estate Investing Starter Tips Guide. Learn how to create financial freedom, positive cashflow and massive wealth with tips like: How to find quality investment properties, finding and keeping great tenants, and easy ways to make investment property recordkeeping simple and more profitable.

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