Real Estate Investing
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Today's Article: "The Skill Sets of a Real Estate Investor"
It’s no surprise that certain skills will benefit you as an investor. That said, it does beg the question, ‘What are the skills necessary to be a successful real estate investor?’ You may have your own ideas on this and I have mine as well. Some of what I present will seem logical and some of it might also surprise you. The idea here is to both confirm some things you may already be aware of as well as enlighten you to additional skills to help you succeed.
For starters, let’s list what I see as the most common skills a real estate investor would need to have to be most successful. I’ll then elaborate on each in time so you see exactly where I’m coming from and why I think these things are important to your accomplishments. Investor skills include (in no particular order of importance):
- Ability to make decisions quickly (take action)
- Ability to negotiate
- Ability to explain complex processes in a clear and understandable fashion
- Ability to eyeball the physical characteristics of a property and use that to determine improvement costs
- Ability to analyze the potential for a particular real estate deal
- Ability to understand exit strategies
- Ability to keep one’s emotions out of a business decision
- Ability to minimize personal risk
- Ability to always do business with integrity (add paragraph about this)
Before I get into the details of these specific skills, I want to point out (as you may have already noticed from the list above) that I did not include things like detailed market knowledge or being handy as essential investor skills. Many investors falsely presume they need to have such skills to be successful in this business and I just don’t agree with that. The skills I just mentioned are useful but also those that can be delegated to your professional team and thus not critical for your success. With that said, let’s look more closely at the skills I do see as more important.
Ability to Make Decisions Quickly
Quick decision-making and the ability to take action is one of the hallmark skills of a successful real estate investor. Note I’m not suggesting in any way that decisions be rash or careless. What I’m referring to instead is the efficiency and timeliness in which decisions get made. The more knowledgeable you are, coupled with ever increasing levels of experience, the easier it will become to make quick decisions. There are several reasons why this is such a valuable skill.
First, quick decision making puts you in line to capitalize on those great deals that you are exposed to in the course of running your business. Slow decisions and too much analysis lead to great deals being lost and I don’t want to see this happen to you. Too many real estate investors, especially beginners get what is called “paralysis of analysis.” They get stuck analyzing the numbers over and over, and the neighborhood, and the situation, etc only to find out that they’ve analyzed themselves right out of the deal usually before they’ve even made an offer or gotten a property under contract. This is not the way successful investors do business. If this sounds like you then break this habit immediately. Get a property under contract and then do your due diligence, not the other way around.
Then after you’ve done all your due diligence ask yourself, “What’s the worst that can happen?” If you can correct the worst from happening before you close on a property then do it. If you can’t, but still want to proceed, just make sure that your decision won’t keep you awake at night. If it won’t then you should probably do the deal. If it will, then you should probably walk away. Keep in mind that the goal of this discussion is about being efficient with your decisions. It will only happen a couple of times before you really start seeing the value of this skill. Remember, I’m primarily talking about making offers here. You can make a quick decision and still have time for due diligence so don’t think of this as opening you up to greater risk because that isn’t the case.
Second, quick decisions give you valuable experience in thinking on the fly and getting into the habit of acting and responding as if your income depended on it. This will not only benefit your business, but also give you valuable confidence that you can keep up with the pros out there and that you are more than just a newbie. Most people get a feeling about something and then analyze this feeling and then act. I’ve trained my mind to do the opposite. I prefer to make a decision and then deal with the feelings and repercussions of my actions after the fact. Have I made mistakes based on this method of thinking? Absolutely. However my successes have always greatly outweighed my mistakes, and therefore I have no doubt that this learned skill has greatly attributed to the achievements of my business.
Lastly, one of the greatest benefits of quick decision-making is the boost it will give to your authority. Clients and peers alike will respect your ability to think and act quickly and will establish you as a force to be reckoned with.