How would you describe yourself as a real estate investor? We’d hope you’d use descriptors like diligent, ambitious, successful, and driven. Unfortunately, though, not all investors have such sterling reputations. While there are many things you can be as a real estate investor, the one descriptor you want to avoid is sloppy or careless.
These attributes might not cause problems immediately, but they’re sure to come. At the heart of the issue, this type of investor investor has forgotten the most important fundamentals of investing in real estate and is sure to have a hard time navigating a sure road to success.
Remember These Fundamentals for Real Estate Investment
1. Quality of service is EVERYTHING
We can’t stress this enough: real estate investment isn’t a property business, it’s a people business. As a real estate investor, you’re addressing a core need in society: housing. And while that housing is where you find value and generate income, you won’t get very far if you’re not focused on the people.
The quality of your customer service (i.e. your property management) is essential to success. Bad managers drive residents away. Good managers see them stay. When you have management that is attentive, responsive, empathetic, and kind, you’re going to see turnover decrease and renewals increase. And that, dear investor, is where you establish long-term gains!
Many investors are tempted to cut corners on management. But your management team is one place where you pay for quality!
2. Success is measured by more than ROI
Tracking investment health seems like it should be easy. There are a whole host of metrics associated with real estate investment and there’s a reason for it. Measuring success and failure is complex in this industry because there’s no one metric that shows the whole picture.
If you rely on ROI alone, for example, you’re going to begin to prioritize minimizing the money you put in while maximizing income. Mathematically this works, but in progress, it presents some problems, such as cutting corners to minimize costs, which can result in poor long-term performance and property value.
Investors look not only at monthly ROI but value added to the property, long-term revenue consistency, tax advantages, and value in terms of equity and appreciation.
3. Due diligence is ongoing
“Due diligence” is a common concept stressed among real estate investors. Even if an investor starts on the right foot, they may fail to realize that due diligence is not a one-time checklist item, but a constant and ongoing process.
Due diligence is the act of exercising of care and investigation necessary to minimize risk and liability in an investment or business venture. But this process isn’t reserved solely for when you buy a property or choose an investment partner or company.
Investors must continue their diligence along the way as they evaluate property performance, analyze and review both existing investment markets and those they wish to expand into in the future, and as they consult with advisors, CPAs, and other professionals. They help ensure that an investor gets the most out of their investments and avoids liability.
4. Healthy engagement builds a foundation for success
There are some big misconceptions about passive investing. It’s important to remember that passive investing isn’t passive in the sense of investing in a stock portfolio. You’re not going to “set it and forget it.”
Passive doesn’t mean hands-off. What it means is that you can leverage the expertise of industry professionals to guide decision-making, handle day-to-day operations, and mitigate risks. The key that so many investors forget is
This engagement goes beyond due diligence. As the investor and property owner, you’re in control of the direction your portfolio takes. You must establish things like acquisition frequency, portfolio review and adjustments, investment markets, and overall strategy and purpose. You absolutely can have help with this through your advisors.
Ultimately, though, individual investors must develop disciplined habits that create lasting engagement. It’s easy to let things fall by the wayside if you’re lacking in this area! Make a point to keep learning about the business, investment markets, and investment strategies. Build a real, trusting relationship with your advisors and managers. When you do, you’ll find that decisions are rooted in long-term strategies designed to make the most of your financial future.
Invest with the ones who have turnkey SFRs down to a fine art – REI Nation!
