In an intuitive sense, we understand that there's a learning curve in real estate. But too many people take the wrong approach. It doesn't just matter that you learn – it matters what you learn, and how you learn.
Here's the thing – there's so much noise in the real estate industry that it's hard to focus on the signal.
There are so many distractions that sometimes it seems like you can't just keep your eye on the ball.
However, with some really good time-tested real estate investment strategies, you can stay ahead of all of the noise, and stay focused and oriented toward what you want.
I have learned a lot from these five simple principles, and I hope that you do too.
Take a look and see how to apply these very important ideas to your real estate investing plan.
Real Estate Investing: Starting Slow and Building Steady
If you're just getting started in real estate, you might be tempted to hit the accelerator and skip the long introductory phase. But that can be shortsighted in many cases. There are financial and practical reasons why people buy a house to live in before they get started in real estate investing.
The system is built up to reward first-time homebuyers who are going to live in the property. It also helps you to get started learning the settlement process and everything else, without coming to the table being branded as a “speculator.”
That's not to say that starting with investment property never works – but in my experience, it isn't the optimal way to start.
Instead, after you've lived in the initial property for a few years and have a lot of familiarity with that property, you rent that out for income, and then start building on that solid foundation to increase your real estate portfolio.
Become Comfortable with Numbers
To become great at real estate investing, you have to be good at math.
Listen, don't worry – don't stop reading now! An English major can absolutely be a great real estate investor.
Getting good with numbers is more about overcoming a mental block. We've been taught that numbers are scary – that they’re esoteric, that you have to be some brainiac to use them well.
That's not true.
Instead, if you learn how to blend numbers with your everyday reality, you're on the path to winning.
It's as easy as this – look at mortgage amortization charts. Look at depreciation for rental properties. Understand the curves that these numerical timelines make.
It's intuitive – it doesn't mean you have to be good at algebra or calculus. It doesn't mean you have to be able to add up three-digit numbers in your head. You just have to look and understand what the numerical data means.
In fact, we're going to talk a lot more about being data-driven and how that helps all sorts of professionals, including real estate investors.
Keep the Emotions Out
Here's another one of the biggest pitfalls that I've seen at work in the real estate investing business. When you see a property, either on paper or on a first-hand tour, block out the emotional reactions. Don't judge a property by how pretty it is, or how many trees are around, or whether or not the doors squeak. Don't judge a property by what your mom said, or what your brother thinks.
Look at that property as a numerical entity. Look at that property as a financial and economic object.
Too many real estate investors get caught in that trap of overvaluing or undervaluing properties due to their emotional reactions. Don't worry about what you see or hear or smell when you walk in the door. Don't put too much emphasis on things like that.
In the end, the data-driven approach always wins out. Yes, you need your intuition and survival instincts, but in the long run, your real estate investment strategy is going to be better guided by a broader look at the numbers than any kind of Spidey-sense that you get around a certain property or set of properties. As for buying a property just because it’s pretty – if you haven’t learned that people stage properties deliberately, you’re likely to end up overpaying quite a bit.
Guard Your Data Sources
From time to time, you will rely on other people to help you value real estate properties and sort out market indicators and facts.
You'll work with bankers, property inspectors, appraisers, attorneys. and others. That's why it's so important to curate your real estate relationships. You can't just go out and pick the first person and who's doing business in a community and take their word as gospel.
That's the way to get burned.
The more work you put into establishing trusted relationships with other professionals, the better off you are. That even extends your relationships with other investors who you meet through meetups or clubs or some other way.
Just like working with numbers instead of emotions, when you get good professional relationships, you're working with other trusted data sources that are feeding you accurate and honest information.
Tune Out the Hype
Again, focus on the signal, not the noise.
If you go to get your hair cut and they're playing flipping shows on TV, don't get dragged into thinking like the young couple who's trying to flip their first house. Don't get caught up trying to imitate those wunderkind twins who flipped 20 houses last year.
That stuff is television, and it’s staged. Even in real life, you shouldn’t be trying to imitate others. You need to blaze your own trail and work with your own data.
Trust Numbers – And Trust Experience
Here's an additional tip that's going to reinvent your real estate investing strategy.
New information tools on the market can help you to get the knowledge you need in much more efficient ways.
If you've never heard of Privy, you need to take a look at this ground-breaking software.
The Privy application takes that critical, accurate data and puts it in front of you to help you make the right decisions.
In a nutshell, the type of thing that you're looking for is the data that is rather hidden in the MLS, and that traditional investors used to get from discussions with agents and experts in a local community.
You want to know what the trends are – to see a map of property values and information about who flipped in a particular neighborhood. You want to see what was done to each property on a timeline, and how it influenced value.
Privy is a window into your real estate world. It's a stream of reliable information that's going to help you craft a real estate plan that works. Don't leave anything to guesswork – build your analysis on a solid foundation, and you will be outperforming the rank-and-file no matter where you’re buying and selling.
As a next step, download our free comparison guide to make sure you're finding the perfect REI tool to power your next deal with accurate (and profitable) data points: