by Professional Investor / Developer, David Campbell
Real estate investing is full of success stories and horror stories. Everyone loves to talk about their investing problems, but those who have been extremely profitable in their endeavors tend to keep their mouths shut. Talking about personal financial success is socially unpopular. Successful investors want to avoid lawsuits and protect their trade secrets. Profitable investors are usually too busy “doing deals” to take the time to teach others how to invest. People who write about investing are often professional “writers”, not professional “investors”. If professional investors aren’t writing about their successes, how can the average person learn to mimic their success? When you find a professional investor willing to share his ideas, make sure you learn everything you can. With that goal in mind, here are some of my best ideas for becoming a more profitable investor:
1) Surround yourself with successful investors. Real estate investing is like learning a foreign language. You are always learning and practicing. To learn a new language, you need to converse with native speakers on a regular basis. If you are studying real estate and you are primarily speaking with other newbies, you are likely to teach each other bad habits. Real estate field trips can be a great way to immerse yourself in the way professional investors think and act. Visit our field trip page to learn more about upcoming investor field trips.
2) If it sounds too good to be true, consult your mentors / investment team. There are a lot of charlatans and thieves in real estate that are trying to separate you and your money as quickly as possible. However, real estate investing really does offer truly ‘unbelievable’ returns for experienced investors who are in the right place at the right time. If you don’t use a knowledgeable team to help you make major decisions, you are taking unnecessary risks with your capital. A good team includes partners as well as vendors. When you are conducting business, try to understand what both parties have to gain from the transaction and strive for a win for both parties.
3) Slow and steady really does win the race. While you can make enough profit to retire off of a single deal; virtually no one retires off of their first deal. It takes time and repeated positive experience to develop the skills, relationships and confidence to hit a home run in real estate. Nine of out ten times you’ll be more profitable repeating “base hit” deals rather than going for the home run. Acquiring multiple properties over a long period of time increases your probability of success. Learn more by downloading (and reading) a free copy of my ebooks “Hassle-free Cashflow Investing” or “Hassle-free Cashflow Lending”.
4) Solving problems creatively is the gateway to profitability. An investor gets paid when he or she effectively implements a solution to a problem. This could be applying capital in a creative way or re-purposing a property in a creative way or solving a seller’s needs in a creative way. When two people are willing to trade for what the other has, there is usually a little bit of room for the coordinator to make a profit. However, when three people have their needs filled in a triangle of events, there is usually an opportunity to make a much larger profit for the person the coordinates the flow of events/transactions. Here is an example: of a “deal triangle” where there is room for the deal facilitator to make a generous profit: There is a baker who has bread but needs corn, a farmer who has corn but needs milk, and a rancher who has milk but wants bread. A person can identify the needs and capacity of each party and then create an exchange network whereby each party gets what they want by indirectly trading what they have. The indirect trade of a “deal triangle” will result in more profit to the problem solver than just connecting two parties in a more typical direct exchange. The fewer people there are who have the capacity and willingness to solve the problem, the higher the potential reward. If you have a real estate, business, or financial challenge you are trying to solve, consider sending me an email with your situation. I am gifted at finding multiple, creative, win-win, and highly profitable solutions. I also really enjoy doing it.
5) Be prepared to identify and act on opportunities quickly. There are opportunities to make huge profits in real estate if you are willing and able to take action quickly when the opportunity presents itself. The first step is to identify your personal strengths (assets) and weaknesses (liabilities). The second step is to formulate your personal investment philosophy (financial objectives) so you can articulate as specifically as possible what a suitable investment looks like. A suitable investment is one that aligns with your resources while offering the potential to bring you closer to your financial objectives. The third step is to learn to “thin slice” deals. Malcolm Gladwell writes about “thin slicing” in his excellent book “Blink: The Power of Thinking Without Thinking”. The fourth step is committing to thorough yet speedy due diligence. It is possible to spend years doing due diligence on a single deal, but great deals won’t wait that long. An investor must filter out the interesting digressions and improbable “what ifs” and focus their research only on the most relevant points and most probable outcomes of a deal. While it is possible to evaluate the risks of a tornado hitting your apartment complex, it is more profitable to focus on more relevant due diligence such as rental rates, occupancy, maintenance expenses, market conditions, etc. Focus 90% of your effort on the highest probable outcome, and 10% of your effort on your contingency plan. The fifth step is to consult your team with your business plan and your research. The sixth step is taking decisive action. The seventh step is reflecting upon the process to determine what can be done better next time.
If you are looking for financial or real estate coaching or if you are looking for active or passive investment opportunities, please send me an email or give me a call. I would be happy to help you.
To your success!
David Campbell
Real Estate Investor / Developer / Financial Mentor
Founder of Hassle-Free Cash Flow Investing
707-373-9966
David@hasslefreecashflowinvesting.com