Not all real estate investments are created equally. For every home-run, there may be five potential pitfalls that can drain your funds excessively. This is not to say that these are bad deals, as each investor has a specific skill-set that can bring out a home’s potential. What may be a great deal for one investor can be a poor decision for another. Finding the right deal may take several months to materialize, but it is far better to wait for a good deal to come along than to force the process and get started with a deal that you end up regretting. There are dozens, if not hundreds, of properties in your investing area, but not everyone is right for you. Compliment your investing style and pursue properties that match your skill-set. This is the best way to maximize your ROI.
Every investor has a specific set of skills, characteristics, traits and resources that set them apart from everyone else. You could be looking to buy one property a year while working at your full time employer, or you have an established portfolio looking for only a certain type of property. These skills, in addition to your goals, will often define everything about the properties you buy. You may get presented with an opportunity to buy a great property, but if you do not have the time or money to work on it, it really isn’t a great deal for you. You should pass and wait for something closer to your sweet spot.
Before you look at any properties, you should ask yourself a few critical questions. How much capital do you have access to or are willing to spend? Do you have time to commit to a rehab deal? How quickly are you looking to see a return on your investment? How much of the work can you do yourself? What neighborhoods are you looking to buy in? What is your risk tolerance? Once you start answering these questions, it will give you a clearer picture on what types of properties you are looking for. If you focus on this box of properties, you will be much more comfortable and most likely successful with every new property you get involved in.
This doesn’t mean that you can’t look at properties outside of your preferences, but the majority of your deals should be in ones that fit your goals and strategies. Buying properties that are out of your comfort zone could prove to be a great lesson, as long as they don’t end up costing you money. If you aren’t handy, and move ahead on a rehab deal, you will quickly learn what not to do. It will be a very eye opening experience.
If something is working, there is no need to switch things up. By sticking with only properties that fit your goals, you will slowly become a master of your niche. Many investors try to become experts in all areas of the business as they are getting started. Not only can this be very overwhelming, it is also not very practical. The reality is that if you don’t expect to wholesale properties any time soon you don’t need to know everything about it. If you enjoy working with distressed homeowners in foreclosure, make it the focal point of your business. In time, you will know exactly how the process works in your area and become much more efficient dealing with homeowners. This will eventually lead to increased production and the desire to stick with a specific niche. If you enjoy something, you are much more likely to stick with it and have more success at the same time.
Sticking with the deals you want can also help you avoid potentially bad deals. Most investors get into bad deals because they aren’t educated on the process or they rush the due diligence. If you don’t know how multifamily investing or commercial buildings work, there are differences that should be acknowledged. If you move forward without knowing everything, you open yourself up to a deal you will regret. By sticking with what you know and what you are comfortable with, you have a much better chance at keeping your business moving forward. A small profit is always better than a loss. You can’t go broke by making a profit. The more you know about a deal, the greater your chances at success are.
What works for a fellow investor may not work for you. Every investing area is different and expectations and commitment may be different as well. The beauty about real estate investing is that you can do it any way you like. You don’t have to go with the flow and follow what everyone else is doing. You can plant your flag in one niche and invest anyway you like. If you stick with investments that are right for you and your business, you will be able to sustain success over the long haul.