By James A. Gage
I read recently that of the people who become landlords, roughly 85% of them file for bankruptcy after five years.
Why the sky-high failure rate? After mentoring new investors for roughly 16+ years, I know it's because people go into real estate investing with "pie in the sky" expectations that don't pan out.
We all know about the late night talk show gurus who promise you can become a millionaire overnight using their "proven" tactics. The fact is, however, that what separates the successful investors from those that fail isn't luck or fortune or hard sell tactics.
What makes people successful is hard work . . . with a little luck thrown in. I know that isn't what you want to hear, but the truth of the matter is that successful real estate investors don't need to watch late night TV gurus because they've taken to heart - and continually practice - the following seven traits:
Trait # 1: Successful investors prepare themselves mentally.
It's easy to get caught up in the hype regarding real estate investing. You hear or read the stories of people becoming millionaires almost overnight - and you want a piece of the action, too. Tomorrow, preferably.
A new investor, believing the hype, becomes impatient and foregoes preparation and education. He then ends up in over his head with his first deal, and when it goes sour, he blames it on the guru who sold him a bum rap.
Savvy investors, on the other hand, patiently lay a solid foundation. They take the time to educate themselves about real estate, financing, and negotiation. When that first deal comes along, they're mentally and knowledgeably prepared to ride out the inevitable ups and downs.
Trait #2: Successful investors work with mentors.
Real estate investing requires skill, patience, and street-savvy knowledge - knowledge you won't get from a guru who has written a best-selling book but hasn't practiced in years.
No matter what their experience level, savvy investors work with experienced coaches, mentors, or investors who can help them reach the next level. They also choose their mentors and coaches wisely - preferring to work with those who actively practice their craft.
You can either pay a coach or mentor to work with you or you can partner with successful investors. Either way, you want to find someone who is actively practicing what you want to accomplish and model your behavior after him or her. (Note: Experienced investors can smell couch potato investors a mile away. So have your game plan in-hand and be ready to get to work.)
Trait #3: Successful investors never give up.
It's a negative world out there - and your spouse, co-worker, or relative can destroy your confidence and drive with statements such as, "What you're doing is sleazy," or "You'll never become wealthy - you don't have the ambition."
Even worse is your own negative self-talk - especially if you're tried real estate investing in the past and weren't successful or if you have yet to close a deal. Beating yourself up is debilitating. The louder your negative self-talk, the easier it is to second-guess yourself and/or not proceed to the next step.
Successful investors know past events don't determine future out comes. They keep a positive mental attitude and consistently work toward their goals even when faced with negative outcomes or criticism. They know that a "no" today doesn't mean a "no" tomorrow. In short, they don't give up.
Trait #4: Successful investors work consistently.
One of the biggest mistakes new investors make is assuming that real estate investing is a 100-yard dash - when it's really a 26-mile marathon.
A new investor, for example, will attend a training course and come out pumped up and ready for action. After putting in a few 40-hour weeks with no results to show for his efforts, the newbie investor becomes burned out and ends up quitting within three months.
Investors who have achieved success, on the other hand, have learned that consistency is what matters. Whether they work 20 minutes a day or 20 hours a week, they devote time to their craft on a regular and consistent basis. Doing so ensures they keep up their momentum and drive - which is why they're ready when that deal they've been waiting for "magically" appears.
Trait #5: Successful investors invest in themselves.
Consider golf pro Tiger Woods: although he's won the PGA Masters three times, plus dozens of other championships, he didn't decide to slow down and coast on his success. Instead, he recently worked with a coach to make his golf swing more efficient. He's now the #1 ranked golfer in the world.
No matter how successful you become, you must continually invest in yourself. Like Tiger Woods, successful investors continue to attend seminars and conferences, network with other investors, read books, and work with coaches or mentors to help them reach the next level in their game.
Trait #6: Successful investors understand Return on Investment (ROI).
It's a fact: entrepreneurs are often times the worst business people - meaning they have the vision needed to get a business up and running but lack the practical application for making sure it becomes profitable. (This is why eBay has Meg Whitman at the helm, not the original founder.)
Ditto for real estate investors. How often have you heard someone brag, "I put hundreds of hours into this deal!" - as if spending all that time is a good thing. If you spent hundreds or thousands of hours putting together a deal, and your profit is only $5,000, then you're not making much more than the person flipping hamburgers.
Experienced investors know that calculating a deal's ROI is crucial for ensuring future success. They keep track of their time and the funds spent/earned to ensure their business remains profitable.
Trait #7: Successful investors have a financial plan.
Once you start generating cash flow from your investments, it's very easy to fall into the trap of spending money - especially if you lived frugally in order to build your investment business. Dinners out, fancy vacations, and a spiffy new car can wreck havoc with your bank balance.
Instead of spending your money, take a tip from successful investors and work with your accountant or financial planner to develop a plan. Your financial plan should allocate monies that support your lifestyle and family, investments in yourself and/or your business, savings for future endeavors and retirement, and donations to your favorite charities.
If you're serious about wanting to be successful at real estate investing, consider how you can change your routines and habits. Like dieting or anything else we do to improve ourselves, the key to success is consistency and most importantly, action! Study these traits and put them to work in your investing business - you will see results. You'll also get to bed a whole lot earlier.