It’s true that the vast majority of individuals who initially make the decision to invest in real estate soon fail. In fact, real estate professionals have found that 95% of the people who start the process to invest in real estate never even make an offer to purchase a property. Why does this occur? It all boils down to one simple word – Discouragement. On the other hand, there are a substantial number of people who decide to invest in real estate, using one or more investment strategies, and they prosper and succeed. What’s different between these two groups of people? The second group has learned to control and even eliminate discouragement from their mindset, while the first group hasn’t.
Let’s look at several things that successful real estate entrepreneurs have done that changed the way that they invest in real estate. We like to call them the 7 secrets that can eliminate that dreaded discouragement for beginning real estate investors. As you learn to incorporate these secrets into your investment strategy, you will soon recognize the benefit of eliminating discouragement from your mindset.
Secret #1 – Understand your Personal Investment Strategy
Each of us are different and we all have separate talents and strengths. Some of us are great with numbers, while others are fantastic in developing personal relationships. Regardless of the differences we have and the talents we share, it’s possible for all of us to succeed in real estate investing, but we need to be aware of our personal strengths and weaknesses. The goal is to match a separate real estate investment strategy to your personal strengths. For example, if you have a talent and skill of doing construction work, you might want to consider looking into finding fixer upper properties and flipping them for a profit. If you are great with numbers and love working with people, you might best look into finding a rental property as your first purchase.
There are basically three major real estate investment strategies that include: rental properties, fixer upper and flip properties, and buy and hold properties. Within these three major categories, there are multiple individual strategies. As you begin your real estate investment adventure, you need to select your individual strategy and then begin to do the research on how that strategy works. It is critical that you understand what to do and how to do it before you do anything. If you decide to go into rental properties as your main strategy, take the time to learn all you can about the advantages and disadvantages of owning rental property.
Once you have a basic and sound understanding of how a selected real estate strategy works, you need to develop your own approach to the strategy. We like to call this approach – your niche. It’s what is going to make you special and help you make a profit from your real estate adventure.
Secret #2 – Create a Roadmap that Will Guide You to Success
Every new real estate investor should start by developing or framing a basic business plan based on the real estate strategy they have studied and chosen to follow. This business plan is really a roadmap you can follow that will help you overcome obstacles and move towards success.
- Set Specific Goals. In essence, this roadmap will contain a list of short-term, mid-term, and long-term goals, all of which will guide you along the path of success. If your chosen strategy was rental properties, specific goals might include items such as; looking as specific properties in your target area, researching rental rates within the target area, identifying funding opportunities that match your credit rating; making the offer, etc. This list of goals should be written out and be extremely specific in nature.
- Each goal should have a timeline or timetable attached to it. You must have a way to measure if you have succeeded reaching the goal. These timelines are not meant to be a constraint on your ability, but rather a way to motivate you to take action.
- Create Rewards for Completing Your Goals. Each goal is a step toward your ultimate success as a real estate investor. Goals are nothing more than dreams if no action is taken, and if you reward yourself for completing the goal, action will usually take place. For example, one of your goals might be to identify three specific rental properties in the target area. Once this goal is reached, you might reward yourself with a special night out with your spouse or significant other. The object is to create rewards that you will remember and enjoy as you reach and complete these initial goals. If the reward you choose has meaning for you, you will work harder to complete the goal.
- Establish Danger Points that should be avoided. Your roadmap should list things that can derail your success in real estate. As you study and develop your personal investment strategy, you should understand all the risks involved and then work to eliminate them. Some of these dangers signs might be:
- Don’t over leverage your property. It’s true that when you use borrowed money or capital to purchase a property, you can magnify your return, but, it’s also true that increased leverage or borrowing can also magnify your risk. When you decide to purchase a property, you need to be aware of how you are going to repay the borrowed capital. Every investor needs to control the leverage and not let the leverage control you.
- Don’t fall in love with the property. When you become emotionally involved with the property, you begin to make emotional decisions instead of fact based and financially sound decisions. If you start to believe that you must have a specific property, regardless of the price or terms, you are setting yourself up for both failure and discouragement. Wise investors always look at the numbers and base their decisions on those numbers.
- Don’t over rehab when buying properties. This is especially true for fixer upper properties. You want to make to make the property as rentable or saleable as you can. When you over rehab a property, you are spending your profis before you ever get them.
Secret #3 – Continue Your Education
Educating yourself should be a life-long pursuit, and it is extremely important for the aspiring real estate entrepreneur who wants to achieve success. There is, however, another side benefit of continuing your education about real estate. Discouragement often appears when things don’t go as planned. By continuing your studies about real estate investing you will plan better and avoid those pains of anxiety and discouragement. And when you are already discouraged because things haven’t gone as anticipated, continued education in the following ways will get you back on the path to success.
- Educate Yourself Through Personal Study. This study can take place in a myriad of ways. You might start by reading and listening to books written by other successful real estate experts. Pay special attention to their stories of how they reacted when obstacles appeared unexpectantly. In addition to discovering that you are not alone in these pangs of discouragement, you will learn specific steps to overcome the obstacles or setbacks that might be causing your discouragement.
Your personal study should not be relegated to simply reading books. You should also search out other successful investors and spend time talking to them about their experiences. These discussions should always be centered first on identifying the problems they may have met, and second, on evaluating specific ways they solved the problems. Don’t pass on the opportunity of learning about their successes in real estate.A third way to continue your personal education is to meet and greet the experts in the field of real estate. Leverage their expertise by learning what they do and how they do it. You may want to meet with well-known appraisers, bankers, and even surveyors. All of these experts can give you information that will help you identify problems along with the best solutions. The time you use meeting and interacting with real estate professionals will also teach you multiple languages. Soon you will know how a plumber, appraiser, banker, title company officer etc. speaks.
- Find a Mentor. Mentors may be paid professionals or they may just be other real estate professionals who have experienced great success. When you are just beginning your career in real estate investing, take the time to meet other like-minded individuals in real estate. When meeting these people, learn to ask questions that are based on specific examples. You will find that when you ask knowledgeable questions, you will get real world examples of success. You might find a mentor by becoming an unpaid intern for them. Offer to do some of their research for them, naturally following their instruction. As your relationship with a mentor grows, your education will also increase.
If you have the financial capability to pay for professional mentoring, it can be worth the money you spend. If you elect to pay for professional help and mentoring, make sure you establish the credibility of the selected mentor. If you are paying for this valuable service, the mentor should be able to provide references and examples of how they have helped other people like yourself.
- Attend Training Events. If you belong to a local real estate investment organization, they will normally have access to local training. Make sure you attend and take good notes. These are also places where you might establish relationships with potential mentors. There are also well qualified national organizations who can provide extremely competent instruction in the specific steps involved in different real estate investment strategies. Many successful real estate entrepreneurs have found that the money they spent on their education was returned many times over in their personal success.
There are also credible webinars offered online that can increase your knowledge about real estate. When selecting a webinar, take the time to assess the qualifications and credibility of the person providing the webinar. The more you learn, the better you will feel, and the better you feel, the quicker your discouragement will disappear.
Secret #4 – Buy Right
Every smart investor should always make money on the purchase. This means that they are buying at market or below market. Naturally, if you can purchase a property below market value, you have built in equity right from the start. The question becomes, “How do you buy right?” It starts by using the following simple steps:
- Know Your Target Market. If you are buying locally, spend time looking at what other properties have sold for. It doesn’t matter what people are asking, what really matters is what people are getting for the property. The saying “Location, location, location” is all important. Make sure you are comparing apples to apples and not apples to oranges. Pay attention to where the different properties are located in the area and then compare sales among true like properties. Once you have established realistic values in a geographic area, then you are ready to start identifying prospective properties.
- Look for Motivated Sellers. When you are ready to purchase a property, it will pay big dividends to know why the seller is selling the home. Once you identify a well-motivated seller, you can make an offer that builds in equity for you at time of purchase and likewise get the property sold immediately for the seller. It’s a win-win deal.
- Learn to Negotiate. Negotiation techniques can be learned and the time you spend understanding how to negotiate will pay big dividends. There are training courses and seminars that will help you learn how to do this.
- Create an Exit Strategy. Many first-time buyers think the exit strategy just means how they can sell the property when they are ready to liquidate the property. Yes, this exit strategy should be considered when purchasing the property. You don’t want to buy a property that is a dog and will always be a dog. You want a property that can be put in a position to be sold with good curb appeal. Forgetting this fact, is the reason why some investors are discouraged when they are left with a property that is in the wrong location and can’t be sold regardless of the price.
The second type of exit strategy that must be considered is an exit strategy that allows you to exit the purchase. If you make an offer on a property and soon find out that it wasn’t what you thought it was when you made the offer, you need to make sure that your offer allows you to walk away. The “subject to” clauses are an important part of the purchase agreement. Discouragement can come when you are locked into a bad purchase.
Secret #5 – Follow the Roadmap
Discouragement and anxiety usually appear when the investor has gotten off course in their real estate experience. These individuals have usually failed to meet short-term or intermediate goals. Perhaps the individual is discouraged because they haven’t found a great under market property in their local area. Maybe they are depressed because they haven’t secured financing. There are numerous reasons why discouragement appears, and in almost all cases it can be traced back to not following a plan and taking action.
- Match your Roadmap to your Market. It’s important for you to immerse yourself in the real estate market on a local basis. Unless you are aware of those things that influence the market, you will be in peril of making decisions that are unwise and possibly fatal.You need to know what things are driving the job market, which schools are best, and where the people are moving to. Sometimes when you first draft your business plan or roadmap you may not be totally aware of changes that are taking place. When you become aware of these changes, make subsequent changes to your goals and timetables. Your discouragement may sometimes be a factor of what is happening around your property and not the property purchase itself.
- Keep a Real Estate Journal. The best way to keep yourself on track and following your personal roadmap is to record what is happening and what steps you have taken. It is a good idea to write your specific goals in your journal along with the timeline for accomplishing those goals. When you meet an objective, write it down in your journal. You will find that by recording both the positive and the negative things that take place in your real estate adventure, you will have a guide book to help you on subsequent purchases.
Be honest with yourself when recording both the good and the bad things that take place. Accuracy in your journal is important. It has been found that this recording of events reaps rewards.
Secret #6 – Upgrade your Mindset
Your mind is a powerful tool and it can change how you act and how you perceive what is going on in your real estate business. If you want to eliminate discouragement from your existence, you need to remove those obstacles that influence those negative feelings, but you must also change the way you think.
- Eliminate Negativity in your Life. It has been proven over the years that we act as we think. This is true in all aspects of our life and is especially true in the real estate business. Start by doing simple things such as removing negative words from your vocabulary. Surround yourself with positive reminders of what you want to accomplish. If you have decided to fix up a property and flip it, then get a rendering done of what the property will look like when finished, and then put this rendering or picture in plain view.Instead of saying “If this doesn’t work, I don’t know what I’ll do,” replace it with “When I finish this property purchase, I’ll be able to create a regular passive income with that rental money.” Start looking at what you want to do instead of looking at negative outcomes.
- Surround Yourself with Like-Minded People. There is nothing that creates more discouragement than “naysayers”. You don’t want to be around people who will tell you what is wrong with your ideas. These type people never take action on their own behalf and deep down are envious of your efforts in improving your life.
- Read Books on Positive Thinking. Books by well-known authors about positive thinking will influence how you think. And when you start thinking different, your life will be different.
- Consider Getting Professional Real Estate Help. If you are discouraged because you think you are alone, then maybe you just need to enlist the help of good professional rental management or the help of a good accounting firm.
Secret #7 – Take Immediate Action
It’s no secret that action creates habits and when a habit is fully adopted, the task in question becomes easier. If you are discouraged, make the decision to do something that requires real action on your part. If you are still waiting to make your first offer, then go out and make an offer that you don’t even expect to get accepted. The important point is to make the offer. And you may be surprised to find yourself in control of a great property at below market value.
One action may not be enough to get rid of the feelings of discouragement. If you are still feeling discouraged after accomplishing just one of your short-term goals, go ahead and fulfill the action for another goal on your roadmap. As long as you are acting, you are progressing. Success in real estate investing is a process and action is also a process. Make it the same process.
There is nothing that discourages discouragement more than simply taking action. You have a roadmap to success in your business plan. If you are discouraged, take the specific action steps you have recorded on your roadmap. When you act, you really do change things.