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Published On: Wed, Oct 14th, 2020

Here’s What the Most Profitable Rental Property Investors Do Differently

Most people think they can invest in real estate. But only a small fraction of people ever take the plunge. An even smaller percentage are successful. The question is, what sets the most successful and profitable rental property investors apart from the pack of investors who struggle to break even or make slim margins? 

photo/Gerd Altmann

The Primary Factors That Set Successful Real Estate Investors Apart

No two situations are the same. Success is a combination of experience, skill, connections, and chance. However, here are some of the top factors that consistently set successful rental property investors apart from the rest of the industry:

 

  • They Understand This One Truth

 

Investors often make the mistake of getting emotionally attached to a property and doing whatever it takes to make the deal happen. As a result, they end up overpaying – something that continues to hurt their ROI numbers for years to come. Successful investors, on the other hand, know they make their money when they buy. 

“If you do it right, your profit will all be made before you even own the home,” investor Jay Redding writes. “When you own something which is of substantially greater value than what you paid for it, then you are playing with house money.”

The moral of the story is to wait until you find the right deal. When the numbers add up, it gives you a chance to be profitable for years to come.

 

  • They Invest in the Right Location

 

As the old saying goes, real estate is all about location, location, location. And the most successful investors in the world understand how to select the right location. They try to buy in neighborhoods that are on the upswing, but that haven’t seen steep increases in price just yet. 

It’s also important to think about proximity to amenities, future developments, and businesses. And though property taxes can change dramatically over time, selecting a neighborhood where the current numbers line up with your budget is always a smart decision.

 

  • They Prioritize Healthy Relationships

 

If you want to be a snake of an investor, you can be successful. But you’ll always be looking behind your back and wondering who is going to come after you – legally, financially, or otherwise. You’re much better off putting people first. And contrary to popular belief, there’s plenty of room for successful investors who also happen to be “nice” people.

Treat your tenants, business partners, and peers well. Prioritize healthy relationships and follow the golden rule of treating people as you would like to be treated. If you do these things, you’ll lay the foundation for future growth. 

 

  • They Hire the Right Property Manager

 

The most successful rental property investors understand that they can’t do everything. They’re acutely aware of their strengths and weaknesses. They also know how their time is best spent. They focus on these select areas, while outsourcing and delegating everything else.

For an investor, a property management company is a critical piece to the puzzle. A good property management company takes care of everything from rent collection and repair coordination to accounting and property marketing. This frees the investor up to focus on acquiring more properties and optimizing cash flow.

 

  • They Feed the Business

 

So many people get lured into real estate investing because of the promise of passive income. Then after six months or a year, they wonder why they’re only making a small amount every month. While the problem could stem from any number of issues, it’s often directly related to how they manage cash flow.

In the early days of being a real estate investor, you need to prioritize putting as much (possibly all) of your rent money back into the business. You want to build up an emergency fund and then stockpile cash to invest in your next property. Or if you don’t plan on investing in any more real estate, the money can go towards paying down the mortgage balance. Siphoning cash off early might feel good in the moment, but it stunts your growth.

Do You Have What it Takes?

Making the decision to invest in real estate and taking the risk to actually buy a rental property is the hard part. So why stop there? If you want to set yourself apart and maximize your investment, you should do what it takes to be above average. And if you follow the factors outlined in this article, you’ll discover that success isn’t as elusive as it often seems.

Author: Anne Johansson

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