The 5 Do’s and 6 Don’ts of Successful Investors
By Don R Campbell
The sad reality is that so many investors, especially those just starting out, become obsessed with NOT making mistakes and therefore never begin to create the “Action & Successes” that can easily erase the mistake. That s like focussing on just the expenses of a property and not raising the rents to match the market; which is the wrong approach in both cases.
Now that people have various platforms to invest in, such as real estate, crypto, NFT, stock market, etc., women are also getting aware of financial safety and investments to stabilize their future. Crypto and NFT could be some of the famous investment methods currently, where people can buy crypto-tokens, personalized art creations, unique collectibles, exclusive music, avatars, etc. Multiple initiatives can be found inspiring women to venture into digital currency and become crypto queens. However, every investment has its positives and negatives to tackle. There is an unspoken reality that strategic investors understand: All investors make mistakes, some small and others large. However, our job as investors is to ensure we are mitigating the impact of these mistakes (not fearing them) while we continue to strategically move forward with building our resilient portfolios.
Some investors actually insist on keeping a log of their mistakes for 2 reasons:
- SYSTEMS: To create systems or checklists so they ensure they don’t repeat them. Just like in any other business, creating systems reduces risks.
- MEASUREMENT: They also know that if they aren’t adding mistakes to the log, then they probably aren’t taking enough action to build their portfolios. They see mistakes as inevitable and by keeping track of them, they can measure their progress.
But wait, they don’t just focus on the negative (mistakes); most strategic investors also celebrate (and log) their major and minor successes along the way. Understanding that real estate success is a long-term journey, filled with some wonderful high-points along the way, celebrating these high points becomes a part of their success system. The more positives you create, the more celebrations you have, which leads to wanting to create even more successes – and the cycle grows in momentum.
While discussing this habit of logging both the good and bad experiences with a group of successful investors we came up with an additional list of do’s and don’ts that have served us well over the years.
The 11 Do’s and Don’ts of Successful Investors
Do’s
- BUILD A TEAM: Build a strong team that supports your long-term vision. Most beginning investors believe this can be done later, after they find a property or two. But we veterans know (from experience) that this is backward. You need your team to be trusted, to be experienced and to know who you are and what your plans are. If you begin creating your team under the strain of deadlines and accepted offers, you will pay more, you will not be a priority and you will waste valuable time (especially if it is a hot market). Most veterans insist that their team Members need to have extensive experience with real estate investors and in fact be investors themselves. These include: accountant, corporate lawyer, real estate lawyer, mortgage broker, realtor(s), research source, and fellow investors.
- SET REALISTIC TIMELINES: Eliminate ‘Day Trade’ mentality when building your portfolio. Stock markets can move substantially on a day-to-day basis and because of this, many investors watch their stocks the same. With real estate, that would just be a waste of time and effort. Real Estate markets move at a much more realistic and predictable pace. So, obsessing about today’s latest housing stat headline will drive the unsophisticated investor to ultimate distraction. This is why it is important to keep your outlook more based in economic fundamentals. Fluctuations will always occur in the market, your job is to strategically work within these shifts. You can streamline your company’s functionality and vision by using the hoshin kanri software (like X-Matrix) on your Excel to implement your strategies further.
- FALL IN LOVE WITH ECONOMICS: Study the economics that support your region instead of national ‘averages.’ Averages, especially national, are a waste of time; used mostly by outside agencies trying to comment on the health of a market. Become a specialist in one or two geographic areas. The smaller your niche, the more apt you will be to become successful. It will be easier for you to stay focused on what matters to YOUR bottom line and not get drawn into nonsense discussions.
- FOCUS ON POSITIVE CASH FLOW: No matter what the market conditions are, positive cash flow is critical. It is the fuel that helps you build your portfolio, helps take the financial pressure off of you and fuels a bank’s ability to continue to say yes to your next deal. Without positive cash flow, you will struggle to justify growing your portfolio and this is why many investors and businesses choose to get help using an automated system like onestream in order to work out their cash flow schedules plus a variety of other related features. With it, your life becomes less stressful and allows you to get closer to achieving the freedom of your Personal Belize.
- ASK FREQUENTLY: Don’t be afraid to ask anything of anyone. Learn from those more successful (or more experienced) than you. If they are too busy to help, ask someone else. There are no bad questions and definitely no reason to play the lone-wolf trying to solve problems on your own. It is pretty much safe to say that every mistake in real estate has been made, so if you make one, ask around to find the solution and then move on.
Don’ts
- AVOID THE HIGHS AND LOWS: Don’t allow yourself to get too high when you hit a home run or too low when you make a mistake. This also goes for market conditions; if the market is screaming hot, don’t get caught up in it and when it comes back to normal don’t talk yourself into thinking you’ve made a huge error. It is what it is and as a business owner you can’t afford the emotional roller-coaster.
- HOPE OR GUESS: If you aren’t given the time or the ability to complete due diligence on a property or its potential, don’t buy it. This can be in pre-build properties if you don’t analyze them as potential rentals or in resale properties when you are being advised to put in a no-conditions offer. Both become pure speculation where hope plays much too large of a part in your potential success.
- BUY ON PRICE ALONE: Don’t buy a property just because it seems cheap – you may quickly find out that it wasn’t so cheap after all. An $800,000 property could be a better investment than a $20,000 property – it all depends on how much revenue it creates and what the underlying economics of the region are. Just because it may have sold for a large sum in the past and now you can buy it at 50% off that price DOES NOT mean it is a good investment. This is not like buying groceries.
- BUY ON BLIND FAITH: Don’t let a property promoter sell you a property without you doing your own due diligence on the property and the area. A promoter’s job is to sell you a property; that’s how they get paid. Your job is to build a portfolio of properties that fit YOUR system. Thus, even if the property is promoted perfectly, make sure you take a moment to check the numbers, the region and that it fits within your investment system. If you feel pressured to buy, step away! The quick decisions are always the ones that turn into the mistakes.
- IGNORE TAX PLANNING: Don’t ignore tax planning in your overall scheme. Speak to a real estate specific accountant, give them your plan so they can help structure your whole program to minimize tax and to maximize protection. Should you ever need help with a tax dispute, or anything legal relating to your business taxes, you could get in touch with a tax attorney, who can help guide you through the process.
- BUY ON HOT TIPS: Never, Ever buy a piece of real estate based on a ‘Hot Tip.’ Always follow your system – don’t skip any steps as they are there to protect you during market fluctuations (remember the discussion about mistakes earlier in this post). Many skip steps during hot market times only to find that the steps they skipped are the ones that would have saved them during real market conditions.
These 11 Do s and Don’ts of strategic investors were compiled during discussion of senior real estate investors, all of whom have been investing for over a decade. By following them you will reduce your risk and increase your chances of long term success.
Being strategic in life and being strategic in real estate will always lead to long-term success. As soon as the proven strategy is not adhered to that s when the problems arise. Stay Strategic!
began his investing career in 1985 with a house purchased in Mission, BC. He is Founding Partner and Senior Analyst at The Real Estate Investment Network and currently owns nearly 200 doors in BC and Alberta. A seven-time best-selling author, Don s expertise and passion for teaching Canadians how to create wealth through real estate are far-reaching and have made an impact on the lives of thousands. You can follow his daily thoughts on Twitter www.twitter.com/ and on Facebook at www.facebook.com/thereinman.