Top Habits of Successful Real Estate Investors: We discuss the critical habits that set successful real estate investors apart. Learn the importance of meticulous planning, deep market knowledge, and assembling a trusted team. From understanding the intricacies of your investment area to staying informed about market trends and regulations, these habits ensure you’re positioned for profit and growth. Hear firsthand stories of investors who transformed their approach, emphasizing the value of expert guidance and a well-thought-out business plan. Embrace these proven practices to navigate the competitive landscape of real estate investing and achieve lasting success.
Brett
0:00:54 – So today we’re going to talk about good habits of success for real estate investors. This is a topic that Jeff sent over to Jerry and I. I thought it was a great topic because, you know, let’s face it, a lot of people have bad habits and bad habits can cost you money, success.
Sponsorship
0:03:58 – We are sponsored by Title Assurance and Escrow, a title company here in Cordova that does all of our closings, title work, escrows, and we only use Title Assurance and Escrow. That relationship is very important because we can get things done for our investors quickly and easily. So to speak with Title Assurance and Escrow, call 901-737-3332 and ask for Chris or April.
Brett
0:01:39 – I read over this list and I agree with every single one of them. I mean, most of them are common sense, right? But you would think. But there’s some young investors that are very eager to get started that don’t sit down and actually write these plans out to understand them. And unfortunately, we deal with a lot of those that are trying to now get out from under. I’ve got a guy that’s got three properties. He’s probably going to lose on all three of them. He got in a hurry, didn’t plan it out properly. He’s probably going to lose on all three of them. He got in a hurry, didn’t plan it out properly, rehabbed the houses very nicely, but we’re not able to sell them for what he thought he was going to sell them for because he didn’t do his homework. So, let’s get into the list.
Jeff
0:02:12 – Is that your guy out there in 38122? That I looked at with you? But he’s kind of on board now, isn’t he? He’s tweaked his system a little bit? Yeah.
Brett
0:02:21 – What he was involved in was buying these properties from wholesalers with their numbers that they told him the house would be worth when he was done Told him what kind of work to do to it to get that number So he did he followed their plan and unfortunately their plan was wrong he understands now that his entire process and plan worked if Everything worked out perfectly right there were no oh shit moments, there were no wait, I miscalculated that. So on paper it looked great, but now that I’ve worked with him for a couple of months and I’m getting him out of these three properties that he’s not going to do very well in, he now understands the system.
Brett
0:03:04 – He understands, evaluated ahead of time, get your plan in place, get your rehab. I stepped him up on his rehab. I told him, I said, look, you’re doing basic rent ready work, but you’re wanting to list for an owner-occupant at top of market value. I said that you can’t put white walls on a brand new Chevy pickup truck and expect it to be attractive. You’ve got to go and put some nice mud tires on it. Same thing with a house. You can’t just go slap some paint on the walls and put a new toilet in the bathroom, but it looks like your house hadn’t been updated since 1970, and then go out and expect somebody to give you $150,000 for it because market dictates that.
Jeff
0:03:40 – Except for Fenwick.
Brett
0:03:41 – Except for, yeah. Fenwick. That Fenwick is going to be my nemesis. I can tell you. That’s going to be my undoing. Fenwick will probably be the house that destroys my career. But anyway, so now that he understands that, he is. I went and looked at one of the properties. He went back in and dressed up a little more and did a fantastic job. It was a brick home we went and looked at. It looked like the kind of house we grew up in, right? Green countertops and beautiful house now. He did a good job. The issue with that is that he didn’t have the right plan. He thought he did. But now that he’s done a couple of these and he’s met us and I’ve done CMAs for him, I’ve given him honest opinions and evaluations of his properties and the work, I mean, I criticize his work. And he took it as good constructive criticism. I didn’t get offended when I told him that because he realized, well, if I’m going to do this and make money, I’ve got to take experts. I’ve got to take people that know this business and work with them and listen to their advice, which is one of those points in our plans. Let’s go through the plan.
Jeff
0:04:42 – That’s the first step is having a plan. You’ve got to have a business plan. You’ve got to have a starting point. You have to visualize the big picture, focus on what’s important.
Brett
0:04:53 – You need to get you an agent that understands the market you’re buying in. Okay? If you’re going to be a flipper, if you’re going to buy and hold, if you’re going to build a homeless shelter, whatever you’re going to do, whatever floats your boat as an investor, you’ve got to get an agent in that market that understands exactly what they’re doing. It doesn’t have to be us, even though you’d probably do yourself a big favor by getting us because we’re pretty good at what we do. But there are a lot of good agents out there that understand this market, understand how to give you a good evaluation on a property, current value versus completion value, and you know, ARV, after remodel value. That’s number one. Number two is they do their homework, right? That’s a very good trait for a successful investor. And when I say do your homework, that involves getting a team together, right? You get a property manager, if you’re going to use property management, get your agent involved, get everyone involved in your buying process so you can hear from all parties locally in this market to tell you their opinion.
Jeff
0:05:57 – Build your team, but more importantly, you have got to have an in-depth understanding of the market you’re getting into down to the exact neighborhood you’re wanting to invest in. Homework, homework, homework.
Brett
0:06:11 – Yeah, the more homework you can do, the more you try to under… And I say this to investors, some of them take me up on it, some of them don’t. Book you a flight. Come in on a Thursday, Thursday, Sunday. We’ll drive you around the city. We’ll show you every single market, explain to you what the common rents are, what the common values are, what markets are C’s, B’s, C pluses, which markets have blue collar tenants, which market has government subsidized tenants. And once you see it, it’ll be a lot easier for you to decide how you want to write your plan for investment. But coming up with a general cookie cutter plan that some guy sold you at a seminar in California is not going to work and we’re dealing with some investors right now that came to us with a plan that just doesn’t work here and we’ve explained it to them. We understand how your process works but you can’t do that here and because this market is so hot, very competitive, 1% rule exists day in and day out, you can’t get the numbers that they’re wanting to get. So get a plan together, understand the market, visit that market, whether it’s Memphis, Arkansas, whatever it’s going to be, go visit the market for a few days. Get you an agent that drives you around and actually puts you in these neighborhoods so you can visually see, feel, understand how that market works.
Jeff
0:07:32 – And also, you know, keep up with the current trends and changes in consumer spending habits. Mortgage rates, unemployment rates, you need to be abreast of all this information because those are the conditions that can change your market overnight. So, you know. Again, just do your homework.
Brett
0:07:49 – Market changes daily. The good investors like Daniel, right, he’s got a niche. Amish has a new niche. He’s got a plan that he put together which just seems to be working for him now. So we’ve got investors that have specific niches on what they like to do, how they want to do it, and how their formula works. So yeah, develop a system and a niche for you and don’t deviate from that. If you do your formula and your ARV says you got to be in at 91.777% of ARV, don’t deviate from that. If it doesn’t meet your criteria, drop it and move on to the next one.
Jeff
0:08:29 – Well, focus when you find your niche, focus on one market. Don’t start out headbanging, you know, buy everything. Just start out with a few single family residential properties, make that system work, and then you can dive off into some multifamily stuff or some commercial stuff. But don’t try to do it all at once. Just develop your process and take your time and grow slow.
Brett
0:08:52 – I will tell you that investors we’ve had on this show that have come into town and we’ve had them on as guests to talk about their philosophy, their ideas, their plans, their goals have all said the same thing. There’s one single thread of commonality between all these investors and they all said, well, we came to the market, we put together a team of people, some of those people we didn’t, we couldn’t trust and eventually found out we dropped them out and replaced them. But we put together a team of people that we trust that we can work with in that market, an agent, a title company, a management company, a leasing agent, contractors, right, inspectors. So they developed that team and they trust everybody on that team. So now, take Daniel for an example. He sent me a property the other day. What do you think? I sent it back to him and said, you should do this. You know what Daniel said? Okay, do it. He didn’t say, well, let me think about it. Let me run some numbers. He trusts the team that we’ve developed over the last several years with him that if I say do it, do it. He just does it.
Jeff
0:09:56 – Well, the flip side of that is an investor has to gain our trust as well. I can count on my hand a number of times that Brett has turned down an offer to provide services for an investor simply because they were just not very friendly or you know they were just trying to see what they could get away with. They didn’t really care about the people around them or the tenants that they were putting in my house. I mean we just don’t work with people that way you know. We have to trust our investors as much as they trust us for this system to be successful.
Brett
0:10:21 – Exactly. No and I don’t often fire investors, sometimes it’s necessary. My success, your success, Jerry’s success, Nick’s success, and the investors’ success all hinge on one common thread, and that is we all know each other, we trust each other, we work together well, there’s loyalty, respect. I’m not going to represent a guy who only wants to buy a bunch of $30,000 crack houses and throw crack heads at them all day long and keep turning it over and turning it over and turning it over. Right? Because for me, that’s a lot of work. And it’s not about money, but yes, I like to get paid too. We’re in business to make money. So it’s got to work for all parties involved. So building a team and trusting your team members to help guide you and help handle your stuff on the ground here, your boots on the ground in Memphis or whatever market you’re in is very important. Very few investors have that. A lot of investors will just pick up the phone, they’ll call an agent, the agent will be like, yeah, we can buy you investment properties all day long. And then all of a sudden, you know, a year into it, they got five houses vacant, getting vandalized, they’re losing money left and right, they’re bleeding money and they can’t seem to get out of it. We get a lot of those guys that we help pull them out of that and we move them toward a new direction. So let’s do one more thing. Stay up to date is very important. What happened last year and how the market was in 2022 is not the same as 2024. In 2022, I couldn’t get you an accepted contract on a house that we offer just asking. We’d always have to go over asking and elevation clauses and all kind of creative terms in the contract to try to get it accepted because it was so competitive. 2023 was a little more of a monotone year. We didn’t have a lot of over asking offers. Everything was kind of going and asking a little bit under properties that are on the market a little longer. Now going into 2024, so far this year, market’s heating up. So we may be in line for a really competitive year. So staying up to date on the markets and what the trends are and what’s new.
Jeff
0:12:23 – Well that’s where your real estate investment broker is going to come in real handy for you because we keep up with the laws, the lending, all kinds of laws and regulations are constantly changing. Part of our job is to know this as it comes to be able to convey that information to you. So it’s very important to stay up to date on real estate tax, lending laws, regulations that could directly or indirectly impact the way you invest. Most of these guys are working regular jobs, they’re 2,000 miles away, they don’t have time to keep up with all that. But that’s our job, to keep up with all these changing laws and regulations to keep you better informed so you can make the decisions you need to make.
Brett
0:13:03 – Not to mention the changing market values, the changing rent values. A lot of people did not anticipate in Memphis or around the country that rents would stagnate temporarily for one simple reason, inflation. Listen, renters predominantly live paycheck to paycheck. I don’t care what part of the country and you live paycheck to paycheck, most of them do. So, when their cost of living goes up 20% overall, guess what? They can’t afford that rent that they previously could afford. They don’t have that disposable income to move up to a bigger house with more rent, they just decide to stay put. That then stagnates the rent out a little bit. So keeping up to date with the current market in Memphis, in Little Rock, in Dallas, or whatever market you’re in, is extremely important. Because what you wrote down on a piece of paper mid-summer in 2023, guess what? Probably isn’t the same as it is today. It’s changed. There’s been changes in the market. So keep up with that. Another good trait for investors is being able to manage risk, being able to know what their risk levels are. I’ve got investors that have high tolerance for risk. I’ve got investors that have very little tolerance for risk. They want to be in B neighborhoods with lower cash flow, but more of a solid rental versus the higher risk stuff in the C neighborhoods. So understand what your risk factors are. What’s your pain level? What’s your oh shit moment when you assess the risk you just always got to make sure you have an exit strategy Yep, exactly. So understanding where your risk lies and We had this conversation one time but not long ago in the truck have an exit strategy So if you got a property that you’re buying and you’re gonna flip it and for whatever reason you’re concerned about Well, what if the market changes and all of a sudden it’s not worth $150,000 when I’m done with it, it drops to $135,000. Well, that’s okay. Well, that’s a risk, right? And if you’re getting into market, you’re willing to take that risk, obviously, but to mitigate that risk, you have an exit strategy. An exit strategy could easily be I’m going to refinance it with the bank and I’m going to put a tenant in it for a year. Let the market rebound, get some cash flow, then I can then sell it as a tenant occupied rental property next year once the market rebounds. So you have an exit strategy but at least have a plan in place that you can do that should the market shift on you all of a sudden. This is a big one. Seek help. Oh,
Jeff
0:15:28 – absolutely seek help. The only thing that means to me is find yourself a dedicated real estate investment broker. Don’t find an agent that lists and sell properties. If you call an agent and that’s what they specialize in, you tell them what you’re trying to do. If they’re a good agent, they will more than likely refer you to an investment broker. Find yourself a really good investment broker, boots on the ground, a guy or gal that’s willing to get out there, tour the houses, walk the houses, inspect the houses, sit down with you, put a strategy together, build you a plan.
Brett
0:16:02 – Yeah, I mean ask for help. What I’ve discovered is that most of my investors aren’t afraid to pick up the phone and say, Brett, I need some help. Brett, I got a problem. Brett, what do you think about this? And that’s my job as their agent. My job as their agent is no different than you calling your attorney for legal advice, your accountant for tax advice. You call someone who understands what they’re doing to bounce ideas off of them. Now, I get ideas from investors sometimes and I honestly tell them that’s the goofiest thing I’ve ever heard of. I don’t know if I’d go down that road and I explain to them why. Amos being one of them, but guess what? The system that he wanted to use that I thought was goofy and wouldn’t work off the bat, we were able to, between the two of us, formulate a plan that is now working. We’re in the process of buying his fourth property right now. The offer is out, hopefully we’ll get it accepted. So his plan does work, not the way he originally planned but with a mix of kind of what I’ve thrown in there and what he’s thrown in there, we’ve developed kind of a plan that we melded together that accomplishes his goal but makes it a lot better for me trying to find the right property for him. So asking for help is very key. You know and yeah get an accountant get you a title company All those things are probably after the fact, but I think your core plan Should involve these ten items out of the gate and let’s go over that again develop a plan Develop a niche if that’s what you’re investing in not just the city the actual Neighborhood that you’re in an agent can drive through a neighborhood for you and say hey by the way There’s five houses under remodel if you got a home on that street. That’s good for you That means you’re gonna see an equity bump probably a rent increase Understand your risk have an exit strategy that is so important because just because the market shifts shifts doesn’t mean woe is me I’ve lost money as an investor. Now you may have lost a little value temporarily but there’s an exit strategy rent it keep it for a year sell it next year let it cash flow for you until the market shifts and goes back to the direction. Seek help don’t be afraid to call and ask questions here’s the thing don’t start off your question with I’ve got a dumb question but, right? Listen, if you don’t know the answer, it’s not a dumb question, period.
Jeff
0:18:30 – I don’t do that anymore. I already know my questions are dumb before I ask them.
Brett
0:18:34 – There’s nothing wrong with asking someone who may know a little more than you a question. So just ask for help. If you call us, by the way, 901-692-7401 or MyMemphisInvestmentProperties.com, if you get in touch with us, we’re more than happy to let you bounce ideas off of us, let you ask us questions, and we’ll have questions for you because you may be doing something in a different market that we don’t necessarily do here, but it may be a great idea. We’ve started doing a few ways of investing here that I’ve learned from Daniel out of Utah, things that he’s done there that work. We’re trying to implement those here because it’s a good option. So yeah, don’t be afraid to ask for help. I think that’s key. That’s very important. So you’re going to build yourself a good team, ask them for help, ask them for advice, ask them to be your boots on the ground, get you an accountant. I know write a business plan is prudent. I think that’s something that’s important because that business plan is going to change soon as you buy your first house. And then after you get through your first one, you’re going to realize that business plan needs to change again. Your business plan is not set in stone. It should be an ever evolving piece of paper because the business plan you write the day you walk out of your seminar and get ready to buy your first house will be drastically different the day you finish that home and that remodel and either flip it or turn it into a rental. And then once you get through that for six months and you’ve got a tenant in place and you’re managing a property and getting cash flow, that business plan will change again and again and again and eventually you’ll end up with a sweet business plan that works for you. That business plan may not work for Jeff, may not work for me or Jerry, but it may work for you, it may work for Daniel, and then Daniel’s plan is the simplest plan in the world and is genius, but guess what? There are investors, one in particular we’ve talked about here recently, that that plan doesn’t work for because they have a different expectation of what they want, how they calculate their returns. So anyway, hopefully that gives you some good tips on good solid habits of successful real estate investors. Listen, there’s no guarantee of success in anything you do. The more knowledgeable people you surround yourself with as part of your investment team, the more chance of success you will have. Going it alone, being hell-bent and hard-headed about your way of doing things, typically will end up causing failure on your end because you’ll make a lot of mistakes in the process, some of them you may not recover from. So don’t be afraid to bring in a team. Don’t be afraid to ask people. Don’t be afraid to say, you know what, I don’t know the answer to that question. Let me call Brett. You know what, I don’t know the answer to that question. Let me call Nick. Let me call the contractor. Let me call the inspector. Every successful CEO in the world is successful. Why? President Reagan said it best. I’m not a smart man. I just surround myself with smart people, right? Same things. A lot of successful CEOs don’t classify themselves to be businessmen of the year or some genius, but they’ve surrounded themselves with a good, solid, smart, educated team that understands how to make it work. So do the same.