Specialist · Grand Rapids, MI · Member since 2012 · 583 posts · 353 votes
Given how much knowledge and expertise we have in this forum, I thought I'd pose this question to any/all who wish to chime in:
Why Are Some Real Estate Investors More Successful Than Others?
A very broad question, I know - but I ask this because there are A LOT of real estate investors who pour their heart, soul, money and years of their lives into this endeavour and get nowhere with it - while others seem to hit one grand slam after another.
Why does this happen?
What are these successful investors doing that unsuccessful investors need to learn from?
Obviously, "success" means different things to different people. As I'm asking this question, I consider a "successful investor" to be someone who is closing several deals per year that net 5-figures and up OR those who are full-time investors (real estate is not just their hobby) and they are living off the income generated by their real estate investments.
I think it's mindset/discipline/expectations. You need to be able to walk away from a deal or go full bore into a deal. Your smarts tell you which to do. Successful people treat the deal as a business transaction to maximize profit. They understand the cost of tying up capital and the value of of a quick exit. Finally, the really successful really set a higher bar for the deals they pursue. In short, some are swinging for the fence and others swing for single/doubles and some sit in the cheap seats. Both swinging probably achieve their goals, but the one hitting homers gets the deals that people like to talk about. Which is more successful? That's hard to say, I tend to think the only one who fails is the one sitting in the cheap seats wishing they were able to play. Although, I do think some get duped into REI to make easy money and don't really learn how to win in the game.
Very interesting question Seth - cause I was just talking with Joshua Dorkin yesterday about posting this exact question, word for word! Great minds...
Anyways, I'd say 20% luck, 40% intelligence, and 40% persistence.
(Not necessarily "book smart" intelligence, but the creative kind)
I think you can be really lucky and intelligent, but give up too easy. Or really intelligent and really persistent and have bad luck. Or you can have luck and persistence and maybe make it.
Thanks Brandon Turner and Bill Gulley for your thoughts (and, sorry Brandon to jump-the-gun on asking this question).
I agree that it does have something to do with the "stars aligning" in terms of the attributes that are most important. Everybody has a different set of gifts, and the most successful investors I've known are aware of their weaknesses and they aren't afraid to pass these responsibilities off to the right people.
I know some successful investors who are terrible at creating websites, they aren't always good at follow-up, they aren't even good at managing their money once they've earned it - but they're good enough at the things that matter the most.
I think it's mindset/discipline/expectations. You need to be able to walk away from a deal or go full bore into a deal. Your smarts tell you which to do. Successful people treat the deal as a business transaction to maximize profit. They understand the cost of tying up capital and the value of of a quick exit. Finally, the really successful really set a higher bar for the deals they pursue. In short, some are swinging for the fence and others swing for single/doubles and some sit in the cheap seats. Both swinging probably achieve their goals, but the one hitting homers gets the deals that people like to talk about. Which is more successful? That's hard to say, I tend to think the only one who fails is the one sitting in the cheap seats wishing they were able to play. Although, I do think some get duped into REI to make easy money and don't really learn how to win in the game.
Surround yourself with smarter people than you are and you will learn, keep your integrity and you will be trusted, be fair and you will be honored, help others and you will be assisted, be firm and you will lead others. :)
Why Are Some Real Estate Investors More Successful Than Others?
what a great question! :)
I'd imagine one major, common challenge is the same thing that can be said for a lotta things in life: Getting in our own way and not realizing it soon enough or maybe not being aware of the things we do to keep us from our goals. Yes, general and vague, but I believe to a likely factor.
reminds me of a conversation I recently had w/a friend who's an immigrant coming from a third world country. In a nutshell, he was just amazed (dumbfounded) in how there could be such poverty in America. Where he comes from, the infrastructure and resources that we have in our society don't come close to the virtually raw land that they lived on in the village.
he's killin' it in commercial right now, btw... comin' from only the clothes on his back w/his family of 3 and his wife w/his broken english. :)
definitely we (i) get in my own way more times than i may realize...
I'll chime in after 36 years of real estate investing, and feeling successful at it over the last 18, but having had many not-successful years. (And man, some REALLY bad real estate stuff - I mean B. A. D.)
Most important thing I ever learned investing in real estate is how much I don't know. I'm forever humbled by the many new things I continue to learn.
Big turning point for me in real estate investing was when I really sat down and defined a long term plan and then focused everything I did from that day on (in real estate investing) on working that plan.
(OH - I'm personally not smart enough to have figured that out - another guy was doing that and I copied him.)
Before that, I went helter-skelter from deal to deal, a real gunslinger, buying this, selling that, "oh - there's another deal ! Wait a minute, maybe we could exchange!" No plan, no clue - I'd change directions before and after lunch! It was madness.
Things got way better after the change, though. The most telling sign was through the last downturn. Sure, I lost some equity, but overall, I didn't "miss a meal," and am now better off than I was going into the downturn.
For whatever it's worth, that was my big lesson. I do observe many people in real estate investing with great questions, like, "What do you think of duplexes?" or "Hey, what about Riverside - do you think Riverside is a good investment?"
And the answer can only be a number of questions, about their plans, their overall belief about the market, their goals, their investable dollars, their tolerance for risk, and most important, their big, long term plan - and unfortunately many of them are like I was - they have no master plan.
Does this help at all? I guess I really feel that I've been both people you asked about, the unsuccessful r.e. investor and the successful r.e. investor.
The successful investors are good at discerning whether a deal is bad or good.They might look at some pointers to determine this or just rely on their gut feeling.
I think it's 2 things that are slightly contradictory at first look:
1. Persistence - those who keep at it and don't give up
2. Adaptability - the ability to change direction with changing conditions
So persistence in one direction when changing conditions mandate a change in strategy can sink an otherwise successful investor. Persistence in my opinion is the biggest factor, but must be combined with the ability to make the changes necessary to keep up with the market.
@Joffrey Long; Plan, Plan, Plan...
@Bill Gulley;Surround yourself with smarter people than you are and you will learn, keep your integrity and you will be trusted, be fair and you will be honored, help others and you will be assisted, be firm and you will lead others.
Ina nutshell, i think you guys hit the nail on the head for the most part. this is exactly what has been preached to me for years now!! haha
I think it boils down to those principles. Everyone doesnt start off with money, a relative with capital, ect, but long as your willing to pla, and surround yourself with people that are smarter than you, in do time, it will all come together. Nothing is new under the sun. oh yea, a little LUCK always help ;)
Thanks Ann Bellamy, Joffrey Long, Tom C., Kelvin K. and Ryan Moses for your input. It is amazing how many different things have to function in harmony within one person's mind in order to achieve their maximum potential. I don't think anybody has it all figured out - but there are definitely ways of maximizing our strengths and finding ways to get past our weaknesses.
Bill pretty much nailed it. I would to the persistance, determination and motivation. Dome are self motivated and determined while others need help with it.
Seth Williams- I think everyone nailed it her with their comments. Personally I have seen investors that had most all of the attributes needed to be successful, but they still failed. Most of them just lacked focus and discipline, and they weren't willing to roll up their sleeves and do the work. Real estate is generally a "get rich slow" business.
Great stuff! It seems to me that a key component to long-term success in real estate investing is to have good intelligence-gathering abilities so you are in the right place at the right time. Having your ear to the ground so you understand what is driving the market as well as what the community "powers that be" want can make all of the difference.
I guess my thought would be that to be successful over the long term you must understand risk.
Risk isn't necessarily bad if you understand the risks of a certain move and compensated for taking the risk. But not understanding the risks involved will eventually present problems.
For example, if you don't thoroughly screen a tenant there's a good chance that it won't be a problem. It may work out well. But but doing a few simple checks you can reduce (though not eliminate) the probability that the tenant will trash your house and skip without paying.
Investing involves risk no matter if it's real estate or anything else. Successful investors understand the risks they are taking and find ways to reduce risks while also making sure they are well compensated for taking the risk.
Great comments and great subject. One thing I haven't seen mentioned is courage. Courage to think big, to plan and execute your plan. A lot of investors are talked out of deals everyday. Plenty of us have been told certain things are impossible, only to find out someone as already done it. So here's my list:
1) courage
2) a plan. Short, medium and long term
3) focus
4) persistence
5) adapt, improvise and re-focus
Joffrey it sounds like we've been on a few of the same roads. Bill those words you have hanging on your wall says it perfectly and Ann without persistence and adaptation we would never reach our goals.
I'm sure all of you have heard the phrase the harder I work the luckier I get, I think luck plays a part but not as much as some of us believe. Education always helps but is not vital. I have seen several people without a high school education make small fortunes.