The Seven Habits of Highly Effective Real Estate Investors

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 heres what I believe the seven habits would be:

Habit One: Know Your Goals

Most of the real estate investors I know set out with a goal. Someone I know started off simply by selling his home to buy two lots side by side and built an 8 unit townhouse complex. He has turned that project into a company that sells and builds hundreds of homes in Toronto every year. Some goals are simple, but lead to big things. Other goals are big and have to be broken down into simpler shorter term goals.

Habit Two: Make Your Money when you Buy

Its 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 propertys 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 want to take on a few extra jobs when you buy a property, I suggest that you think about hiring a property manager, an accountant and a real estate agent. The property manager can do repairs to the property and collect rent. The accountant can do your bookkeeping and yearly taxes, and the real estate agent can work with you to find more real estate investment properties. Just make sure that the people that you hire are trustworthy and will help you achieve your goals.

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, its 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

My husband and I are millionaires thanks to our real estate investing, and we owe a large part of that success to the investment partners that contributed equity to our investments over the years. If we hadnt had those partnerships, we would likely own only half of the properties that we currently own today. Its hard to reach your financial goals if you arent willing to enter into partnerships with others- and partnering with other investors is essential if you are starting out in the world of real estate investing without a lot of money of your own. Family members, friends, or colleagues could be potential partners.

Habit Six: Be Persistent

The other characteristic of every real estate investor I have ever met is that they never ever give up. You will hear No a lot. Get ready to face the objections and find creative solutions. In our experience weve been turned down by:

• Potential partners not wanting to get involved in a deal weve invited them into,
• The banks on just about every deal we had trouble getting financing and had to deal with multiple lending issues,
• Family sometimes we try the bank of parents and we almost always get rejected but we still try because the interest rates are so favourable,
• Insurance companies if you are an out of province landlord, most insurance companies dont 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 Management Companies its possible that the property management company that you would like to hire doesnt want to manage 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 havent 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.

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