Tips for Success From Experienced Investors

When it comes to investing, there’s no silver bullet for guaranteed success. 

From the outside looking in, it often appears that way. It’s easy to look at experienced investors and assume that their success can be attributed to a series of circumstances that “just happened to work” in their favor. But the truth is this is rarely the case.

Profitable real estate investing isn’t random, or simply “the luck of the draw.” Instead, the beauty of real estate investing is that investors have a great deal of control over the performance of their rental properties. There’s a lot that you can do –both before, and after you invest, that can impact your success.

One excellent way to set yourself up for profitability is by learning from investors who have been down the same road before. Hearing their advice and learning from their mistakes can help you to avoid many problematic issues, and save you from having to learn everything the hard way yourself. As any investor will tell you, the best investment strategies are the result of hard work, clear objectives, and careful planning. These factors, along with knowledge and experience will help you to find success with real estate investing.

Here are some tips for success from experienced investors who have ‘been there, done that.’ See how you can get yourself off a winning start, and make investing in rental property a stress-free –and profitable venture.

See also: 11 Tips for Stress-Free Investing

• Learn to Read the Market

“When you learn it for yourself, you’ll realize that most of the folks that pose as experts don’t actually know anything about basic housing market dynamics,” says Greg Rand, Chief Strategy Officer at Renters Warehouse. “This is a good thing for you to know for yourself. It’s like changing a tire. You should know how to change a tire, and you should know how to read a housing stat.”

There’s a lot of uncertainty surrounding the housing market, and a lot of stories about pending housing crashes looming somewhere on the horizon, but it’s important to avoid buying into the hype. You should be able to do your own market research, and remember that housing markets vary considerably from location to location. If property appreciation is important to you (and it is for many investors), then look for an emerging market; one that’s expected to experience growth. Then when you have a property in your sights, run the numbers to get an idea about the type of returns that you can expect. 

At the end of the day, home prices are a good indicator of the supply and demand equation. Home prices over the last eighty years have consistently gone up. Even after the real estate recession of 07/08, property values recovered and went on to appreciate higher. 

Tip: Head over to the Renters Warehouse Research Center for inside data on your housing market. See market data on any housing market across the country including population trends, home price performance, and more.

• Know the Market You’re Investing In

It pays to have inside knowledge of the market you’re investing in; which is one reason many experts recommend that first-time investors start by looking for property in their own backyard. 

“The backyard thing is a place to start,” says Greg Rand. “Backyard is good because you’re familiar with it, if something good is happening or bad is happening, you find out about it because your kids live there…you’re doing automatic surveillance of your investment because you live there.” But if you can’t invest in your own area –say housing prices are sky high or there’s not a lot of opportunity to buy rentals, then consider casting a wider net. Look for other areas that you’re familiar with; maybe somewhere you vacation to, or the location your parents retired to. 

Or, if you have a place that you’re interested in –then get it on your radar and work out from there, learning about it as you go along. The key is being familiar with the area –that’s what will give you an advantage.

• Diversify Your Investments

Should all of your investments in one area, though? While some investors take this approach, as it allows them to keep an eye on their properties –there are benefits to expanding your search net and going farther afield –especially when it comes to growing your rental portfolio. 

• Set Clear Goals

“When I was interviewing property investors for my second book, a common pattern quickly emerged: every successful investor has clear goals,” explains Rob Dix, author, investor, and founder of Property Geek and Property Hub. 

Having goals will help to guide all of your investing decisions, allowing you to know when you should purchase a potential property.

“For any given property, there will be lots of arguments for and against buying it – if you ask five different people you'll get five different answers (more if you ask a lawyer),” explains Dix. “You need a way of evaluating whether it makes sense to you: in other words, whether it'll get you closer to your goal.”

Having clear goals will help you to build a solid strategy for success. It’ll keep you on track, focused, and moving in the right direction. It will also show you where you should be spending your time and resources in order to get the best returns. 

• Treat Your Investments Like a Business

Your real-estate investment is just like starting and running your own business. It requires planning and management, managing income and expenses, and taking a professional approach with each aspect of property management. 

Make sure you factor in all expenses, and budget accordingly. Plan for taxes, vacancies, and anticipate maintenance and repairs throughout the year. 

• Find the Right Tenant

What can make or break the success of your rental investment? The right tenant, of course! 

While it can be tempting to rush through the process of finding a tenant to keep income rolling in and your vacancy rates low, it’s important to ensure that you have screening policies in place to ensure that only qualified applicants make it into your property. 

One of the best ways to keep vacancy rates low is to price your rental competitively from the start.

Matt McKinney, construction engineer and real-estate investor says that when renting out a property, he starts by determining the true market value for his rental and then pricing it just below that. This approach will give you a much bigger pool of applicants to choose from, helping you to secure the most qualified tenants. 

• Assemble Your Team

Matt McKinney also urges investors to find people that they can trust.

“For us it was we worked with a Realtor that we could trust, we found contractors that we could trust,” says McKinney. He even had a model that he could trust, using it to assess different properties, outlining investment property criteria.

You might be able to do everything on your own, but that doesn’t mean you have to. Working to assemble a team of professionals that you can turn to when you need them can help to make life a lot easier. 

Professionals that you should consider having on your team include an investor-friendly Realtor, a lender, an accountant, an attorney, and a reputable property manager –if outsourcing property management is on the cards.

Hear Matt McKinney’s backstory and find out how he first got his start!

• Consider Rentals as a Back-Up Strategy

Fix-and-flips, or buy-to-sell properties are a popular investment strategy for some –but these investments can also be tremendously risky. Profit is generally highly contingent on timing the market just right –and if you get caught in a downturn, you could stand to lose out. 

But purchasing buy-to-sell properties with an exit strategy in mind can help to mitigate a great deal of risk from the equation. One strategy is to purchase property that would also work as a rental. Rentals are, by nature, very low risk. When done right, these investments can weather economic downturns while providing a steady stream of cash flow as you wait for their value to go back up. 

To find properties that will perform well as a rental investment, be sure to do your homework ahead of time, and run the numbers to see what your income and expenses will be.

See: Numbers You Should Be Running on Every Property

While no investment is entirely risk-free, the truth is –failing to invest is the biggest risk of all. By starting early, and applying a smart approach to growing your portfolio, you’ll be able to benefit from the compounding effect as your investments grow, and your returns increase. By taking the advice of experts and experienced investors, you’ll also be able to sidestep many common issues that often impact first-time investors, helping you to jumpstart your success. 

Thinking of getting started with rental properties? Check out Being a Landlord: The Good, the Bad, and the Ugly –for a quick look at what you can expect when you start investing in rentals.