Markets are cold and heartless. They do not care if you do not understand their dynamics. They do not care if you do not look before you leap, and misjudging a market can be the quickest way to crash and burn. Sounds horrible, but it has to be that way. The market quickly clears out those who make mistakes. On the other hand, the market can provide you with all you ever wanted and more. It comes down to knowing and understanding the market you plan to work.
So where are you going to work? Can you define it? Who is buying there? Who is selling there? What are the prices it will bear? To be successful you need to master the answers to these questions or at least be able to figure out the answers very quickly. Otherwise, how can you spot potential profit-making opportunities? Mastering all of this takes time and learning. In fact, the learning never stops because markets are constantly changing. This means you have to change, adapt, and relearn things. Always working to master your market. If you can, you will be very successful.
Deal analysis is one of the keys to success in the real estate investing world. You simply have to run the numbers on any potential deal. However, you also have to understand that some of those numbers are just a “best guess”. They are numbers based on past experiences. And as we know, past performance is no guarantee of future returns. But sometimes a guess is all you have. You cannot expect every number to be perfect, and you won’t find the perfect number every time.
This is a big one. Becoming a real estate investor means overcoming fear—a lot of it. And there are quite a lot of things to be fearful of. There is a lot of money that can be lost. There are the unknown, leaps of faith you have to make. There are angry sellers who have to be negotiated with. There are contractors who have to be hired, managed, and paid. All of this and more is often new to the first timer. That little voice in your head begins to raise doubts: “What if I get yelled at,” “What if I make a mistake,” “I can’t make such a low offer—they will never accept such a thing,” “Contractors are all crooks; I can’t manage them.” And while these all may have some validity, you will have to master your fear and try.
Remember, fear is simply a reaction to the unknown. You have never made an offer, never done a rehab, never screened tenants. But often the best way to get over the fear is by doing. We have all had (still have) these fears, and you will make mistakes, but I can tell you the fear goes away and it gets easier every time. Eventually you will be able to look back and laugh at what seemed to be such big obstacles.
The last thing you have to master is yourself. As demonstrated above, you will be entering uncharted and ever-changing waters. This voyage can be really scary, if you don’t go, you will never achieve your goals or find success. Remember, it’s not easy and don’t get sold on a dream. It takes a lot of work and effort before you can be successful. You will need to master yourself, your time, emotions, money and spending habits. You may actually have to transform yourself quite a bit from the person you are today to be a successful investor/entrepreneur. It takes time, but it can be done.
Have you mastered these four areas? How did you do it? What did you have to change?