Have a Real Estate Investment Plan & Stick to the Plan
Who is the greatest investor of all time? That's easy; it's Warren Buffet, without question. Of all the valuable advice Warren Buffet has ever given, perhaps none was more important than this:
"The good news I can tell you is that to be a great investor, you don't have to have a terrific IQ. If you've got 160 IQ, sell 30 points to somebody else because you won't need it in investing. What you do need is the right temperament. You need to be able to detach yourself from the views of others or the opinions of others."
In other words, you need a plan, a framework, and you need to have the confidence and resolve to stick to the plan. In real estate investing, you want to develop a framework for how you will make buying, and selling, decisions. And then, you need to have the discipline to buy and sell based on that framework.
Have A Real Estate Investing Plan
The purpose of this article is not to give you the plan. It's to help you understand the right questions to ask to develop the right plan for you. Right for the market, you are investing in, right for the resources you have at your disposal, right for the business infrastructure you want to build out, and right for your personal level of risk tolerance.
Are you looking to invest money long-term and gain passive income? Are you wanting to find underutilized properties, transform them to their highest and best use, and sell them for a profit? Are you going to build a network of contractors who can help you remodel homes, or are you looking for turn-key properties that will require only the odd service call? Are you going to speculate on market upticks and downturns? Are you going to get into a highly leveraged position, or do you plan to play it much safer?
Only you can answer these questions. Make sure to hold the emotional discipline and temperament to answer them truthfully and wisely. Once you've answered these questions, it's time for you to develop the framework for making buying and selling decisions.
The questions to now ask are what factors will make a property an attractive investment for your portfolio? What Capitalization Rate does a property need to have to make it a buy decision for you? What would the Capitalization Rate need to fall to make it a sell decision? Does the overall economy factor into that decision, and what metrics will you use to determine when to buy and when to sell? How will you determine if a property is undervalued, and by how much would it need to be undervalued to make it a buy decision? The list goes on.
Stick to the Real Estate Investing Plan
You've asked yourself all the right questions. You've taken the time to write down a detailed framework for what you will invest in and how you will make buying and selling decisions. Great job!
Making the plan was the easy part. Now it's time for the hard part – sticking to the plan. Despite all the outside noise, it's in adhering to the plan that the game is won and lost. Sticking to your real estate investment plan takes a lot of mental and emotional discipline.
The keys to sticking to the plan are trusting the process, knowing who your trusted advisors are, and accepting that you'll often be going in the other direction of the masses to be successful. You made the plan with careful deliberation when things were moving slowly. You had time to think everything through and with a mind clear of emotion. When you get out there in the chaos of real life, emotions are high, and time to make decisions are short. Remind yourself that all you need to do is stick to the framework. Trust the process.
Knowing who your trusted real estate investment advisors are is essential to mental clarity. These advisors should include trusted business mentors, top real estate agents and lenders, and other real estate investors—people who have been there before. The worst possible advisors tend to be family and friends. For all the right reasons, friends and family tend to give all the wrong advice. They worry about you and, as a result, tend to become naysayers. They also very likely lack the vision that you have.
The very best real estate investors often buy when the majority of the market is selling and sell when everyone else is buying. Following the masses will, by definition, give you average or below-average results. When you are selling because your plan tells you it's time, and you are watching the rest of the market buy, you're going to get a jolt of emotions. In that movement, remember Warren Buffets' advice and have the temperament to let the emotion pass you buy. Stick to the plan.
You've Got This
This may be the most important real estate investing article you ever read. Business success and failure are massively influenced by mindset. Diligently develop a plan for your real estate investing decisions, stick to the plan amid the chaos of real life, and watch your real estate investment portfolio grow.
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