Real estate investors who develop and adhere to well-defined investment plans win more deals, make more money and achieve consistent success. I’ve used the following 5 step plan and earned millions of dollars since starting my real estate investing career in 1994:
- Goals & Objectives are an investor’s best friend. An investor must be 100% clear about what they want to accomplish and why it is important. Goals must be supported by short to medium term objectives that are specific, measurable, attainable, relevant and time specific.
- Purchase Criteria are defined based on the goals and objectives and serve to focus the investor on a property type, geography, price range, etc… With criteria in hand, an investor can enter the “deal flow” and develop a grounded understanding of the market and then move quickly in pursuit of the best opportunities.
- Acquisition includes sourcing qualified properties, negotiating with the seller, financing, contract language, due diligence, handling of the title, legal & accounting issues and the first 90 days of ownership.
- Property Management consists of two parts: improvement and steady state. Improvement is just that, improving the property to increase rents, net operating income and resale value. Steady state is the management of all operational aspects of the property including collections, tenant relations, marketing & sales, legal, maintenance, regulatory, etc…
- Disposition includes determining when to sell, preparing the property, negotiation with the broker and buyer, contract language, managing the buyer through the removal of contingencies, handling title, legal & accounting issues and the close.
Investors without plans learn lessons the hard way. They spend lots of money for training and help from so-called experts, pay too much for their property, buy in bad locations, retain incompetent property managers, accept unethical behavior and finally, lose money and give up after the first deal. Whether you invest directly or through partnerships, develop and execute a good plan, stay the course and success will follow. In upcoming blogs, I’ll provide additional detail about each of the bullets listed above, the five steps of a successful investment plan.
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