Nine Characteristics of Successful Real Estate Investors
by Vena Jones-Cox
In my 10 years in the real estate business, I bet I've met 5,000 investors at
all levels of knowledge and experience. Some have become amazingly successful,
while others have lost steam or experienced dramatic failures. In this time,
I've noticed that there are certain characteristics that come with real estate
investing success. As a matter of fact, that I have come to believe that I can
predict with fair accuracy whether a particular investor will be successful. All
I have to do is find out a little about their attitudes and actions, and I'll
know what their chances of becoming successful are.
Before I outline the specific characteristics that I've found in successful
investors, I’d like to define what I mean by "successful investor". A successful
investor is not the person who owns the most properties or does the most deals,
or who has the most zeros in his net worth. A successful investor is simply a
person who knows what he wants - financially, personally, and in terms of what
he wants to contribute to the world - and uses real estate investing as a way to
get those things. For a successful real estate investor, real estate is a means
to an end, not an end unto itself. A successful real estate investor works to
become as financially secure as is necessary for his peace of mind and who is
happy and comfortable with his investment activities.
Successful investors I've known include high school dropouts and PhD's, men and
women of all races and backgrounds, people born into poverty and people born
with trust funds, guys who started investing at 19 and those who started in
their 70's, part-timers and full timers. There is no single predictor of
success, but there are things that I've found that all successful investor have
in common. Here are a few.
Successful Investors Have a Plan - and Work It
It's simple enough to put pen to paper and figure out how to become financially
independent in two or five or ten years. It's another thing altogether to wake
up each morning and do the things you need to do to reach this goal. Somehow,
your real life always seems to get in the way of your long-term goals.
Successful investors battle this tendency to get caught "in the thick of things"
by creating not just a list of goals, but a daily plan for getting there.
Successful Investors Network
Real estate investing must be the only profession in the country that has no
accepted curriculum of formal training. Since your success as a real estate
entrepreneur relies in no small part on your ability to get reliable information
and advice when you need it, and since your local community college doesn't
teach courses on important topics like how to evict a non-paying tenant, the
only answer is for you to find a mentor who can teach you the ropes.
Choose a mentor who is knowledgeable, motivating, accessible, and is known for
high ethical and business standards. Don't abuse your mentor by constantly
asking for information that you could get from a simple trip to the library. And
don't forget to thank your mentor by taking him to lunch, giving him gift
certificates to his favorite restaurant, and, of course, letting him in on good
leads when you find them. Where do you find mentors? Try your local non-profit
real estate investment or landlording association. It's full of people who are
there to share.
Successful Investors Cull Their Herds
When I was a little kid, I read an article about chicken farmers. This article mentioned that when the new chicks hatched, the farmer killed the weak,
undersized, and deformed chicks before they had a chance to grow up. I was, of
course, horrified, and immediately began making plans to open an orphanage for
runt chickens. Unfortunately, my home in the suburbs and my insensitive parents
conspired to keep my project in the planning stages to this day.
Most real estate investors look at selling their "dud" properties with the same
horror with which I view the wholesale slaughter of slightly imperfect baby
chicks. They will keep a property year after year despite the fact that it loses
money, doesn't fit the owner's goals, is a huge management hassle or is in a
neighborhood that has become a warzone. Successful investors review their
portfolios at least once a year, and aggressively get rid of their loser
properties before they can damage the profits from their winners.
Successful Investors Protect Their Assets
What's the use of building a huge real estate portfolio if a single lawsuit
could wipe it all out? Why bother to achieve financial independence if the bulk
of your estate will end up in the hands of the government? And why is it that
the average real estate investor does absolutely nothing to reduce their #1
yearly expense - taxes? Arranging your affairs to protect your assets from
creditors, plaintiffs, and the taxman is tedious, complicated, and time
consuming. Yet every successful real estate investor takes the time to do it,
thus assuring that their hard-earned money stay theirs.
Successful Investors Have a Code of Ethics
We tend to think of our investment activities in terms of bricks and cash. In
fact, the real estate business is about people. Without sellers, renters,
contractors, agents, and so on, you would have no real estate business. And
since your business activites affect so many other people, I think it's
important to decide how you are going to treat the people you come into contact
with each day.
Since there is no formal code of ethics for real estate investors, it's up to
each of us to decide how we'll behave toward customers, tenants, sellers,
workers etc. Instead of using as a measure, "what can I get away with?", or
"what allows me to sleep at night?", perhaps the proper question is, "what’s
fair?". Take the time to think about your activities and how they affect people
that you come into contact with.
Successful Investors Involve Their Families
In ten years, I have yet to meet a truly successful investor who did not have
the support of his (or her) significant other. Because your real estate
activities generally involve spending (or promising to pay back) tens of
thousands of dollars at a time, and since your business will take time away from
your family, I think it's very important to sit down with everyone who's old
enough to feed themselves and explain what you're doing, and why, and that you'd
really like to have their help or at least their understanding. If you have a
spouse who's reluctant to allow you to take out a second mortgage on your home
in order to invest in the deal of a lifetime, try sending him or her to a
beginner's seminar on investment. Some of your significant other’s very natural
fears may be overcome by an understanding of what you're doing.
Successful Investors Treat Everyone Better Than They Expect to Be Treated
What goes around comes around. If you think that your reputation as a buyer or
landlord doesn't precede you, think again. When you go the extra mile to solve
people's problems, both profit and success will follow.
Successful Investors Stay Educated
Since I began investing in real estate full time in 1989, my state has passed a
mandatory seller disclosure law. The federal government has made lead-based
paint disclosures mandatory and expensive to ignore. Congress has changed the
rules for capital gains taxes twice. HIV-positive people have become a
"protected class" in terms of fair housing. My city has passed ordinances that
say that I can be fined or jailed for renting to drug dealers. Mortgage money
for high-risk borrowers has become cheap and easy to get. The Fair Credit
Reporting Act has been revised to include landlords. Things change. Your
business is affected. Stay on top of it.
Successful Investors Pass On What They've Learned
Just as successful investors have mentors, successful investors become mentors.
By passing on their knowledge to novices, they keep our industry alive, give
others at chance a financial independence, and get a wonderful sense of their
own accomplishments. Now that's what I call success.
Bio:
Vena Jones-Cox’s real estate business focuses on finding great deals on 1-3
family homes, then lease/optioning them to homeowners or wholesaling them to
investors and renovators. All told, she buys and sells about 50 properties per
year.
Vena is a frequent guest lecturer at real estate investment groups throughout
the country, and particularly enjoys working with new investors. Vena frequently
authors articles on real estate investment and the regulatory environment for
various newsletters and publications, including The Real Deal, her own monthly
newsletter. She has been a guest speaker at the Cato Institute in Washington,
D.C., lecturing on the effects of lead-based paint regulation on small
investors. And in her spare time, Vena hosts a popular weekly call-in radio
program on public radio. Real Life Real Estate Investing can be heard throughout
the Midwest and throughout the world on the Internet (WNKU.org) Wednesdays from
5:00-6:00 PM EDT.
Vena Jones-Cox is a past president of the Real Estate Investor’s Association of
Cincinnati, the Ohio Real Estate Investor’s Association, and the National Real
Estate Investor’s Association. She intends to form the International and,
eventually, Pan-Galactic Real Estate Investors Associations so she can be
president of those, too. Vena Jones-Cox has been featured in publications such
as The Cincinnati Enquirer, Smart Money Magazine, Money Magazine and Reader’s
Digest in articles about successful real estate entrepreneurs.