Rich Dad Real Estate Team
April 13, 2022
Most successful real estate investors are self-starters who simply will not submit to the daily 9-5 grind. By working for themselves, however, a real estate investor is inherently responsible for their success rate, as well as their failures. The ones that succeed have one thing in common—they’ve learned to think like the rich.
Do you want to get out of the rat race? Re-train your mind? Think like the elite. Here are five strategies to help you do just that.
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Know Exactly What You Want to Achieve
It is surprising how many people can tell you want they don’t want out of life or business, but few can definitively tell you what they DO want. It is this difference that can make an impact on a successful real estate investor. The key is to stop thinking about the things you don’t want, and start thinking about what you do want, and more importantly, how you will achieve them.
You know you don’t want to work for someone else.
You know you don’t want to live one or two paychecks away from disaster.
Reframe these ideas in your mind and change them into directives.
“I want to work for myself, every day. I’ll do this by treating myself like a leader, and set my own goals.”
“I want a solid cash flow, and I know exactly how much money I need per month to cover my living expenses.”
Putting action to these ‘wants’ is key. A successful investor knows how much they need and they develop a plan of action to generate the equivalent amount of income. How many properties do I need in my portfolio to accommodate this figure? What types of properties can I invest in to create this cashflow? How long will it take me to reach this goal? And ultimately, how and when will I roll these properties into larger cash flow properties?
To back it up, successful investors map out their plans with spreadsheets and cash flow projections that maps the road ahead and helps support these numbers. But, your plan will need to be fluid. Factors such as an ever-evolving market, education, and economics will force most you to adjust.
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Make Cash Flow Your Investment Goal, Not Capital Gains
You see and hear about it all the time now: house flippers. They are everywhere! ‘Buy a distressed property, fix it up, and sell it high!’ That’s the idea, right?
Successful real estate investors see it differently, because there is a problem with just being a flipper: you are gambling on the idea that the value will rise in the future. What if the market goes down? What if it crashes? Your entire return hinges on the price going up.
But if you are investing for cash flow (or rental income), then you are always on the receiving end of positive cash flow. This is an asset that can put money in your pocket for years to come. Successful real estate investors know this. Your investments are assets, your cash flow is increasing and you are not gambling on the market. If your asset goes up in value, then it’s icing on the money-cake.
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Be an Optimist, But Always Be a Realist
Even the best real estate investors lose money. It’s never the goal, but it is a reality for most. The best investors learn how to minimize potential risks. This is called ‘conducting due diligence’ and you must do this before every property purchase.
It seems like an obvious point: Make sure you check this out before you buy it. Right? But there is much more to due diligence than just checking property liens and taxes. A successful real estate investor puts each purchase through a risk assessment they have created to find financial pitfalls.
You should be factoring in vacancy rates in the area, HOA’s, insurance costs, and more. For example, you could have a great property, and be ready to lease it out for positive cash flow, but what if the HOA doesn’t allow renters? What if the insurance is so high that it puts the rental rates out of reach and the property cannot be rented to cover all of the cost and expenses and add profit?
Be thorough in your evaluations of a home or property for investment. You don’t have to know everything, but setting up steps to protect yourself from investments that can cost you money rather than bring you money is the mark of a successful real estate investor.
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Learn How to Attract and Keep Tenants
We always seem to want something newer, better. Your older, reliable car is great… until you take a ride in your friends shiny, brand-new car, right? Your television set works just fine, but once you watch the game on your buddies 80” plasma T.V., it doesn’t seem enough for you. It isn’t an uncommon feeling. You were made aware that there is something better out there.
When it comes to real estate investing, it’s good to understand this notion about people. You want to attract tenants? You need to make them aware there is something better available to them. There are decent apartments down the road, but you have a single family, 3-bedroom with a nice patio and great curb appeal. This is where you shine.
There’s a caveat to this, however, and it’s important. Do not over-improve a property. If you put too much money into a home or property to make it ‘better’ than the competition, it still has to fit into the budget of the property. Many people love big granite countertops and soaking tubs, but if you spend the money to do that in a Section 8 rental (or any lower income rental), it might not be the best investment of your money.
Your updates should fit the type and style and budget of the home you are investing in.
So, where is the sweet spot between too much improvement and too little?
If you are showing a home to potential renters, it will likely be empty. So, your walls and trim and paint job will stand out. Make sure a property is freshly painted and without holes in the walls or stains on the carpets.
The Broken Window Theory is a good rule of thumb. It says that if you leave a broken window, there is a greater likelihood of additional windows being broken. Over time, vandalism only escalates. This will cost you money and renters are more likely to treat the property the same.
On the other hand, a home with some nice upgrades, fresh paint, and clean floors has more of a chance of retaining renters who take care of the home and remain as renters much longer.
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Keep Your Eyes Open
Being successful in real estate investing is knowing that the business is a numbers game. The more properties you find, the more offers you submit. The more offers you submit, the more deals you close. The more deals you close, the more money you make.
To get and keep the numbers in your favor, you should always be looking. But the reality is, you are only one person and to get to these numbers, you’ll need to find ways to expand your reach. You can establish multiple ways to find new opportunities, as well as set up ways for opportunities to find you. This is called using a birddog.
Using a birddog, in this business, means having an individual or more hunt and find properties and opportunities and bring them back to you. This can be family, friends, colleagues or anyone who is out in residential neighborhoods regularly, like inspectors, landscapers, cleaning services etc.
To recruit a birddog, you want to educate them on what you are looking for in a property, how to spot them, and what you are willing to pay.
Go over the following:
Potential properties that do not have a For Sale sign in the yard. (You can find these on your own!) Vacant properties, bank owned properties (vacant but with a lock box on the door). These are properties that you cannot readily find on the internet or through MLS.
Spot these properties by looking for homes with boarded up windows, piles of newspapers, overstuffed mailboxes, broken windows and doors, no curtains or blinds, and overgrown or dead grass.
Assess the property by having your birddog do his initial assessment first. Is it in good, bad, really bad, or awful condition?
Request at least six photos of the property from your birddog that shows all sides of the home. Ask them to always include as many photos as they can.
Using a birddog to bring more opportunities your way increases the numbers game, and increases your ability to be successful in real estate investing.
If you are reading this, chances are you are already starting to think like a successful real estate investor. Where other people see risk, you can see potential and cash flow. Simply dreaming it will not make it happen, but implementing tried and true strategies such as these is a great start to thinking like the rich. It will take financial education and detailed planning but the payoff is success.