What Are the Seven Habits of Highly Effective Real Estate Investors?

By Julie Broad

Remember that book by Stephen Covey that was printed in 1989, Seven Habits of Highly Effective People? In it's day it was a best seller, and even now it's still great advice. I found my old copy on my shelf the other day and I started to wonder... what would the seven habits of a successful real estate investor be?

After some thought, I realized that a successful real estate investor is not a special breed; I personally believe that anyone could become one if they really wanted to. However, they would need to practice these seven habits:

Habit One: Know Your Goals

The first thing that most of the real estate investors that I know start out with is a goal. One of the investors I know in Toronto sold his home and bought two lots side by side on which he built a townhouse complex that had 8 units. Successfully completing that project gave him the start he needed, and now he has a company that sells and builds hundreds of homes every year. As with anything in life, goals that you set can be simple but may lead to big things; whereas larger goals may have to be broken down into simpler shorter term goals.

Habit Two: Make Your Money when you Buy

It's very risky to pay over market value for a property in the hopes that the rent will go up, the area will improve, and/or the property's value will increase. The simple formula for long term success in real estate is to buy a desirable property below market value, in an area with a lot of potential for future growth.

Habit Three: Hire Help

Unless you want to buy yourself a job when you buy a property, hire a property manager. Unless you are an accountant, hire one to help you with taxes and bookkeeping for your properties. And, in most cases, we also recommend you hire a real estate agent. Just take some time to find one that will work with you to achieve your goals.

Habit Four: Use Just the Right Amount of Leverage

Every single money-making real estate investor that I have met has made money in real estate, in a big part, due to the ability to use leverage. Even the richest people will eventually run out of cash if they keep buying property. Leverage allows you to use a small portion of your own money to buy a property. The less money you put in, the higher your potential return on investment. In really simple terms, if you put in $10,000 on a $100,000 property and earn $5,000 in a year, your return on investment is 50%. If you had paid cash for that $100,000 property your return would still only be 5% ($5,000). Too much leverage equates to too much risk though, so find a balance. If you buy a $100,000 property and only put in $2,000 of your own money and the market value of that property drops to $90,000 you now owe more on that property than it's worth.

Habit Five: Find Good Partners

I love the success stories where someone with nothing but big dreams and a lot of initiative ties up one or more properties with contracts. They had little to no money, so while they had the properties under contract, they went out and found people who did. If you aren't starting out with a big bucket of cash, it's tough to make millions in real estate if you aren't willing to partner with others. Your partner might be a family member, a friend, a colleague, a company or even someone you haven't met yet. We are millionaires from our real estate investing thanks to a couple of great partners that contributed equity to our investments along the way. We would likely only half of what we own now without them.

Habit Six: Be Persistent

When starting out in real estate (or even when you're established) you're going to hear the word "no" a lot, so make sure you don't stray from your goals. Some of the people you could hear "no" from are as follows:

- Potential partners that do not want to partner with you on a deal,

- The banks - we've had issues getting financing for almost every property deal we've been involved with,

- Family - sometimes we try the bank of parents and we almost always get rejected but we still try because the interest rates are so favourable,

- Insurance companies - if you don't live in the same province as the property you are trying to insure, most insurance companies don't want to do business with you. We have approached and been turned down by numerous insurance companies that won't insure our Ontario properties because we live in British Columbia,

- Property Managers - sometimes the Property Management company you want to hire isn't interested in managing your property.

A true real estate investor will keep going even if they keep hearing "no". This is what separates the successful investors from the ones who just give up.

Habit Seven: Research - Always be learning

- The best investors are the ones that ask a lot of questions, keep their eyes open for new opportunities and do a lot of research. Many get right into the details of a city. They go to the municipal offices and pull the official plan. They get zoning details and applications. They talk to the city councilors about plans, they attend city council meetings and know everything that is happening in an area.

Not every good investor I know possesses every one of these habits. And I know there are habits that many good investors have that I haven't covered. But as I thought about the most effective and successful investors that I have met or read about, I realized that almost all of them did possess each of the above habits. And, that anyone could really do what they did if they set out to establish these habits and practices in their real estate investing. - 23229

About the Author:

Learn How to Retire a wealthy real estate investor with Julie's free Real Estate Investing Starter Tips Guide. Learn how to create financial freedom, positive cashflow and massive wealth with tips like: How to find quality rental properties, finding and keeping great tenants, and easy ways to make rental property recordkeeping simple and more profitable.