What Are the Seven Habits of Highly Effective Real Estate Investors?
The book titled Seven Habits of Highly Effective People, written by Stephen Covey, was first published in1989. I found my old copy of the book the other day, and as I flipped through the pages I started wondering what the seven habits of highly effective real estate investors would be.
I believe that none of the habits of a successful real estate investor are particularly extraordinary. In other words - anyone could be a highly effective real estate investor if they wanted to be. Of course, this is only my opinion, and the topic has not been subject to scientific study. But here's what I believe 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 plan to handle everything involved with the ongoing maintenance of a property, you should plan to hire a property manager. You may also want to hire an accountant to do the bookkeeping and the taxes related to your real estate investments. Additionally, a real estate agent is also someone you will want to find to help you in your ongoing quest to find properties to purchase. It shouldn't be hard to find one that will understand your goals and will work with you to achieve them.
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
As a real estate investor you are going to hear "No" many times, so be ready to hear the objections and find alternative solutions. I have personally been told "No" by:
- Potential partners not wanting to get involved in a deal we've invited them into,
- Banks- banks can be very picky when it comes to lending money. This means you might have trouble with financing and other 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 are an out of province landlord, most insurance companies don't want to deal with you. This has been an issue for us in the past, as we own some properties in Ontario but live in British Columbia,
- Property Managers - sometimes the Property Management company you want to hire isn't interested in managing your property.
And even though we have been turned down by all of the above at one time or another, we keep pushing ahead to reach our goals.
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. - 23199
I believe that none of the habits of a successful real estate investor are particularly extraordinary. In other words - anyone could be a highly effective real estate investor if they wanted to be. Of course, this is only my opinion, and the topic has not been subject to scientific study. But here's what I believe 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 plan to handle everything involved with the ongoing maintenance of a property, you should plan to hire a property manager. You may also want to hire an accountant to do the bookkeeping and the taxes related to your real estate investments. Additionally, a real estate agent is also someone you will want to find to help you in your ongoing quest to find properties to purchase. It shouldn't be hard to find one that will understand your goals and will work with you to achieve them.
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
As a real estate investor you are going to hear "No" many times, so be ready to hear the objections and find alternative solutions. I have personally been told "No" by:
- Potential partners not wanting to get involved in a deal we've invited them into,
- Banks- banks can be very picky when it comes to lending money. This means you might have trouble with financing and other 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 are an out of province landlord, most insurance companies don't want to deal with you. This has been an issue for us in the past, as we own some properties in Ontario but live in British Columbia,
- Property Managers - sometimes the Property Management company you want to hire isn't interested in managing your property.
And even though we have been turned down by all of the above at one time or another, we keep pushing ahead to reach our goals.
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. - 23199
About the Author:
Learn How to Retire a rich 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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