How to Navigate Today’s Real Estate Market—Top Tips From Three Expert Investors

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From inflation to interest rate hikes to low inventory and elevated prices, today’s market can give some real estate investors pause. Industry volatility can set off emotional reactions in investors who haven’t fortified themselves against the ups and downs of the market. Navigating these fluctuations takes knowledge, patience, peer support, and the right set of tools to keep cash flow under control and your head above water.  

We spoke with three investing experts about their strategies for building and maintaining a successful real estate investing business—regardless of the challenges the market might present. Here are their best tips.  

Rely On Your Real Estate Fundamentals

It’s true that some things just never go out of style. For Liz Faircloth, co-founder of The Real Estate InvestHER and real estate investment firm DeRosa Group, it all comes back to fundamentals. 

“There are fundamentals that will never go out of date, no matter what’s happening in the economy,” she says. “You need to buy from a motivated seller. If they’re not motivated, you’re going to pay top dollar. I don’t think that ever goes out of style. Regardless of the economy, if it’s a buyer’s market or a seller’s market, the fundamentals of investing always are true. There’s always opportunity, but I think this market needs patience.”

Being patient requires that investors leave their emotions out of the deal. “This is another great piece of advice a mentor gave me years ago and that I tell my students regularly,” says Matt Faircloth, who co-founded DeRosa Group alongside wife Liz and who teaches new investors how to navigate the market. “You’ve got to leave your emotions out of it. Real estate can drum up emotions because the prices and stakes can be very high. I’ve seen people lose emotional control in real estate. The best way that you can be successful is to not let your emotions get involved.”

Naturally, when the stakes (and dollar amounts) are so high, this is often easier said than done. Matt says, “I’m not successful with that all the time, but when I am, I’m able to make clear-minded decisions and see beyond the cloud of emotions.

“When I first got started, I didn’t stay as focused as I should have,” he adds. “One day I’m looking at a fixed book deal; the next day I’m looking at wholesale; the next day I’m looking at a piece of land. It was exciting, and I had a lot of fun and I met a lot of people, but I didn’t get anything done. 

“For those just getting started or looking to scale, the best thing they can do is to choose an initiative in real estate investing and stick to that for a while. Focus on that, achieve success in that initiative, [and] don’t allow the shiny nickels to distract you. If you don’t have immediate success in that initiative, that’s OK. Keep trying until you start to see some traction.”

Find Your Community

Without exception, every successful investor we spoke with emphasized how critical it was for their business to draw on the support of a like-minded community. 

“I would not be here without community,” says David Richter, investor and author of Profit First For Real Estate Investing. “I think it’s very important for you to be around the right type of people. Go to a local meetup that’s free in your area, like a real estate investment association or an REI meetup.” 

Matt agrees that community is key. “If you’re not networking with other real estate investors, then it’s like you’re literally sitting in a corner trying to invent the wheel that is going to one day go on your Lamborghini that you also are going to build from scratch. You’re way better off being part of a community of people who are already a few steps ahead. They’ve already built the wheel, they’ve already got the chassis and the drivetrain together.”

If you’re not engaging with your community, he adds, “in essence you’re trying to build something that many people have already built. You’re way better off getting advice from others and sharing across communities. Go and ask questions like, ‘What is the best company for this or that?’ or ‘What are the good neighborhoods in Albuquerque?’ You shouldn’t be answering these questions on your own; you should be taking them to online communities.”

For Liz, it was obvious that the community she wanted was one she’d have to create herself. “We saw this underrepresentation of women. We didn’t see them speaking. We didn’t see them on podcasts. They were never keynoting, especially in the investing circles we went to. We knew women were out there investing and said, ‘Wouldn’t it be great if we can pull them together to create a community?’ The community aspect is the cornerstone of what we’re doing. Every time you join a community, you see things and experience things differently, and that has a lot of power in it.”

Get a Cash Management System in Place Before You Get Big

For some investors, barriers to profit and growth can come down to simple organizational and money management strategies. These are the systems that ensure that a business has the cash flow it needs to operate and the funds it needs to pay its suppliers. 

Without such strategies, a payroll might be missed, or a vendor may not be able to collect. Your business could be turning a profit, but without the ability to properly manage where and when cash is moving, you’re likely missing out on maximizing that income. 

David Richter has been a Profit First devotee for many years. Because of the way they work together, he recommends Profit First and Relay to his Simple CFO clients. “I took a call today with a guy who’s just breaking the $250,000 to $300,000 benchmark in his business and I’m like, ‘Boom, this is a great time to start, like right now.’ Before you get to seven figures, and before you start doing a crazy amount of deals, you need to get something in place so that when you’re at a million, it’s not more money, more problems. 

“If you’re just starting out, you’re in a great spot to get Profit First in place and to start creating great money habits in your business.” 

Use the Right Tools

When Liz and Matt launched DeRosa Group, Liz was managing the company’s financials with “Excel and a checkbook.” The growth of their business made them realize early on that this method wasn’t sustainable. As the number of partners and investors they worked with increased, they leveled up on the tools they used to grow. 

Relay is one tool that helps them delegate, manage, and keep track of their cash. “Up until we signed up for Relay, I had to give my partners my credit card number,” says Matt. “Relay makes it very easy for me to give access to accounts but with a limit. They can use that access to run their side of the business.”

“Brick-and-mortar banking limits things,” adds Liz. “Replacing our brick-and-mortar bank with a digital banking system helps us grow in terms of our borrowing ability, our income and expenses, and making sure our QuickBooks is up-to-date in a streamlined way.”

In order to implement Profit First, using Relay was a must for David. “There’s friction and even resistance from some banks,” he says, explaining how a Profit First structure requires multiple accounts. “There are excessive fees and headaches. That’s where Relay came along as an online bank, where you can go and set up an account within 20 minutes. And they’re Profit First-certified, so they understand and have built it into the flow of their user interface. Profit First is a part of that. They’re helping you automate your profit inside their system.”

Face the Hurdles Head-On 

In David’s view, one of the common hurdles in the real estate industry is an investor’s inability to achieve clarity in terms of what they make, spend, and keep. 

David adds, “They can’t understand where money is coming from, where it’s going, and if they get to keep any of it. Most entrepreneurs don’t like to dive into the numbers—they’re ashamed or embarrassed. It’s usually the one issue that keeps people up at night. We talk about marketing and sales, even though finances are the thing that keeps us awake.” 

This avoidance of facing the topic of money head-on and discussing it with industry peers and colleagues should become a thing of the past for any real estate investor who wants to grow. 

For Matt, clearing a hurdle is a matter of vision. “The biggest block that I see is not thinking big enough. Investors just see what’s in front of them, which is, ‘Oh, it’s hard to find deals right now.’ They’re not thinking big enough, and they don’t believe in themselves. Their thinking doesn’t match their capacity. Thinking big is thinking differently as the market changes, and then realizing that they could be a little more creative.”

Make Growth Personal

Growing a real estate investing business is about more than just the business—it’s about the entrepreneur behind it. To understand why you’ve stopped growing, you need to ask yourself some personal questions—about both your successes and your shortcomings. 

“Even if the marketplace is down, someone is thriving,” says David. “So what is it about you?”

Some questions he suggests you ask yourself include:

• Do you have personal roadblocks in your life right now that are stopping you from doing the things that you need to do? 
• Are you doing too many of the things you shouldn’t be doing? 
• If the market is down, does that mean you need to pivot to a different type of real estate investing? 
• Are you cut out for real estate investing? 
• Are you doing better right now than other people are? 

David adds, “You need to look at your success and ask for clues from that success. That way, when downtimes come, you can lean on that and not just your gut feeling.” 

For Matt, a major milestone in growth involved a major shift in mindset: He had to learn to think like an owner rather than like an employee and go from wondering when he’d get paid and how much he’d make in wages to asking himself an entirely different set of questions. 

“I learned to start asking owner-level questions like, ‘How do I de-risk this? How do I grow this? How do I learn from my mistakes, and how do I skip a few steps on the ladder to grow?’

“More importantly, above all else, the epiphany I had was, ‘Who can help me?’ Brandon Turner says that the way you grow in business is by doing what you are great at and then surrounding yourself with people that are great at things you’re not great at.”

Liz also says growth is an extremely personal process and one that she focuses on in order to continue to expand her business. She adds: “For you to grow, you have to grow yourself. In other words, people want to scale their portfolio and get into larger deals, but they’re not willing to do the work on themselves. We can learn a skill or hire out a skill—that’s the easiest thing. The harder part is, as an entrepreneur, really honing your leadership skills, your communication skills, your enrollment skills, and your negotiation skills. As we scale, the biggest limiting factor is ourselves. To grow a company, you have to grow yourself.”

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.