6 Skills That Define Every Real Estate Investor
In theory, real estate investing sounds relatively simple: buy a property, transform that property, and either flip the property for more than the initial purchase price or rent it out to tenants. Simple, right? Not so fast.
While the basic steps to succeeding in real estate are fairly straightforward, mastering the logistics requires a serious amount of experience and expertise. From knowing when and where to buy to handling the repair work that can accompany both serving as a landlord and a successful fix and flip, there’s a lot to know about real estate investing.
Successful investors must have more than a passing interest in real estate. Instead, a thorough mastery of all of the many ins and outs of the field is indispensable. These six skills define every real estate investor.
Basic Problem-Solving Capabilities
The ability to quickly and adeptly solve problems is a valuable life skill in general, and it comes in quite handy in real estate transactions. Understanding the best path forward and, more importantly, how to get there can virtually make or break a major deal, and that often requires a lot of quick thinking and the ability to improvise.
Say, for example, you’re considering purchasing a property, but the inspector finds a major issue with the HVAC system. This could be a reason to forego a sale as the associated repairs are likely to be expensive, but it could also provide leverage in further lowering the purchase price. As an investor, it’s important to be able to evaluate these circumstances and act.
These kinds of skills also apply once a property transaction has been completed. In many cases, fixing up a property veers off course, with repairs taking longer than anticipated, new issues that pop up during the course of renovations, and projects that don’t work out as expected. A good investor well-versed in solving problems can approach these kinds of roadblocks with knowledge and attention to detail, guaranteeing a satisfactory outcome that benefits property values and future potential. Without these kinds of skills, a fix and flip, for example, can go downhill quickly, leading to unnecessary expenditures.
Strong Financial Knowledge
There’s no way to buy property without a financial transaction. Whether you buy in cash or seek financing for your purchase, an absence of financial knowledge will doom your new property before you even get started. If you want to make a profit and build your portfolio, you need to know at least a little about the financial side of buying an investment property.
What’s a good interest rate? How much do you need to borrow to fully cover the costs of a property purchase? How do you negotiate a lower price without upsetting the seller? How do you calculate the ROI on property improvements? Understanding the ins and outs of lending, making upgrades to a home, calculating rent, and paying bills are a required part of transforming your property into something worthwhile.
Before you buy a property, stop and consider the financial aspects. Determine how much money you’ll have to pay in interest payments, how much you’ll need to upgrade before you can sell or lease to tenants, and what repairs are best for your ROI. As every seasoned investor knows, these kinds of factors are at the root of long-term success.
Real estate is an ever-changing landscape. Some years are better for buyers and others are better for sellers. If you’re going to succeed as a real estate investor, you have to know the difference between various market conditions and, most importantly, the current local market in your area.
All real estate investors are expected to be experts in understanding the dynamics of real estate markets, and for good reason. When you know what the market in your area means for you, you’re better able to evaluate the merit of area listings, make competitive offers, and determine how much a property can sell for in a fix and flip – or rent for, should you choose to hold property for passive income purposes.
Every transaction, whether buying or selling, should be accompanied by proper due diligence. When you take time to thoroughly analyze everything from recent property trends to home prices in the specific neighborhood in which you are involved, you’ll increase your odds of success. This process can also keep you from pulling the trigger on a risky property, giving you a little time to think things over while you do your homework.
Whether you’re fixing and flipping properties or getting ready for tenants, handyman skills go a long way in saving you money and preparing a property for its next purpose. From little things, like resurfacing cabinets, to bigger jobs, like repairing plumbing problems, the more you know how to do, the better.
Every property you buy will require a little work, even newer builds in good condition. A fresh coat of paint, some new carpet, or even a new kitchen counter can go a long way in increasing the ROI on your fix and flips or demanding more rent from tenants. If you can do this yourself, you’ll save yourself hundreds or even thousands of dollars in work, increasing your margins even further.
A little know-how about home maintenance will also help you in evaluating the competency of professional jobs. With an education in the average times certain renovations take to complete, like a kitchen remodel or finishing a basement, the better you’ll be able to evaluate quotes for projects and materials. If a contractor tries to overcharge you or bill for too many hours, you’ll be immediately aware. With a little education, you can keep your costs as low as possible while still ensuring the quality your property deserves.
As a real estate investor, there are a lot of details to keep straight. Loans, negotiations, the closing process, repairs, renovations, and marketing all require significant time and attention, no matter your plans for your property. If you can’t keep up with these kinds of elements, it’s going to be very difficult to turn a profit. In fact, if you let the ball drop, you may end up reducing your profit.
Without organizational abilities, it’s extremely hard to handle all of the many tasks that go into a successful investment. That’s why all expert investors are good at keeping tabs on the many pieces and parts that go into a successful portfolio, organizing and managing everything down to the smallest details.
With organizational expertise, you can help ensure the biggest possible returns on your investment. From vetting lenders to planning the perfect combination and timeline of repairs, you can make sure no stone goes unturned. In addition, great organizational capabilities can improve your timelines, speeding up your fix and flip or making sure your property is ready for tenants as quickly as possible.
Novice real estate investors often think real estate investing is a solo effort. In some ways, they’re right – you buy properties with your own money, repair and renovate them with your own money, and make your own decisions about what to do with them. However, few investors truly purchase property without any kind of help. From real estate agents to contractors for big projects, you’ll probably need at least a few extra sets of hands to achieve your financial objectives.
As expert real estate investors know, successfully purchasing property and transforming it for your own purposes is more like being a project manager. With so many moving parts, you need to know how to talk to people, how to insist on the changes you want to see, and how to ensure that projects stick to your timelines.
Only someone truly skilled in management can handle dozens of different professionals without stepping on toes or losing control of challenging situations. With management skills in your back pocket, you can make quick work of the entire process, from initial purchase to final sale.
Real estate investing isn’t as easy as it sounds, from negotiating with sellers to the time and energy that goes into preparing a property for leasing or sale. However, some traits and skills can increase your odds of success. By focusing on talents like management expertise, market knowledge, and financial savvy, it’s possible to put yourself in a position for a positive ROI, no matter the purchase you have in mind.
Scott Clift is a licensed real estate broker with Westpark Loans. He has been in the real estate industry since 1994. His team of seasoned professionals specialize in providing real estate loans for investors and other self-employed individuals. When you are ready to invest in real estate, call Westpark Loans to secure your financing at (844) 574 LOAN or by visiting westparkloans.com.