If you’ve ever purchased a home, you have a sense of how real estate financing and transactions work. Reading foreclosure notices, attending auctions, and repairing and flipping homes is not rocket science. Thousands of Americans do so every year without specialized knowledge or training. Some people buy and sell dozens of properties each year; the only difference between you and those investors is experience and effort—and before they bought their first foreclosure property, they didn’t have experience either!
Buying and selling foreclosure properties is not a get-rich-quick scheme. It’s also not easy: It takes time, dedication, and real effort on your part to succeed. Don’t put in the effort, and you won’t succeed.
Successful real estate investors share some common traits. They treat investing as a business, objectively analyzing each deal for its risk and reward. They can communicate effectively. (We’re not talking “slick” here. You don’t have to be a polished public speaker, but you do have to be able to express yourself clearly so others understand your requirements, your goals, and your intentions.) They seek win-win situations with homeowners and build long-term business relationships with lenders, contractors, real estate agents, and other professionals. And finally, they demonstrate a real commitment to success: They’re willing to work hard, to overcome problems, and to stick to their plans and their goals even when times are tough.
Experience is helpful, but effort and dedication are crucial. No amount of knowledge will help you if you’re not willing to put in the time and effort required to succeed. But this is true of anything that is worthwhile and profitable.
Almost every real estate investor has lost money on one or more transactions, even big-name investors. What makes these investors successful is that they learn from their mistakes and the mistakes of others, and manage to string together more successes than failures. To minimize your risk, start with one property and build in enough buffer (20% or more) so you won’t lose your shirt. Eventually, as you gain experience, you can take on more properties.
Sticking with an investment during the learning period is not easy. Many investments are complicated and take time to learn and understand. During the learning period, we can all become disheartened. But the learning curve is part of the tuition we must pay to succeed.
Most successful investors will tell you, “When I started out, I made a lot of mistakes. I considered quitting several times. But eventually I got the hang of how the market works, and since then I’ve done pretty well.” The most successful investors may add, “Sure, I still make mistakes and have a loss every now and then. The way I invest isn’t perfect, but I’ve gotten a feel for investing this way, and I stick with it.”
When starting out in any investment category, you will make mistakes. Mistakes are to be expected; don’t be discouraged. Select a narrow topic, take the time to learn its nuances, and you will be squarely on the path to outperforming market averages. Why? Because most investors flit from one investment to another. The longer you stay in your area, the more likely you are to be playing against an ever-revolving pool of rookies.
Investors who find success through repeated experience continue to develop their knowledge and skill in their subcategory of investing. They accept the learning curve as part of the process of developing sound investment skills.