09 Apr How to Reduce Risk By Becoming a Resilient Learner
There can be a lot of risk involved in real estate. One of the keys to being successful and minimizing that risk is becoming a resilient learner. I can guarantee that you will make mistakes along the way, but the important thing is that you don’t let that stop you, and you don’t let those mistakes keep happening.
I truly believe no matter who or where you are, you can become a successful real estate investor. You will have to work hard, and you will have to be okay with failing. The important thing is that you get back up, learn from your mistakes and make better decisions next time.
6 Steps to Becoming a Resilient Learner
Learn from Mistakes
You’re never going to learn to build businesses, invest in real estate or learn how to work with stocks unless you’re willing to learn from your mistakes and become a resilient learner. Mistakes can be turned into what I call “noble failure”. In other words, you fail, and you fall flat on your face. You don’t stop there, though. You really analyze what went on and what caused the mistake to happen. Furthermore, you make a decision on how you can do better next time. You will always make mistakes, but if you fail forward, you can learn from them and be a better investor for it.
Learn to Get in the Game
If I’m going to teach the game of baseball, I can instruct a player on the sideline all day, but they will never fully learn until they get in the game, on the field. Real coaching doesn’t take place in a vacuum on the sidelines. Real coaching takes place in the middle of the game, while plays are being made.
For example, if I were to explain to you that properties you buy, especially multi-units, need to have separate metering, you’ll understand that conceptually. You won’t understand the urgency of that concept until you’ve had to pay the bills while you’re in the game. So, when it comes to getting started in real estate investing, you can’t just sit on the sidelines for the rest of your life. You have to be willing to get in the game to make some money.
Learn to Develop a Team
In real estate, you want to develop a quality team in order to make a large income. You want people that know more than you do in important areas. You want to have bankers, mortgage brokers, agents, property managers, and contractors.
This ensures that you don’t have to do it all. When you develop a team, you can spend your time looking for properties. Instead of taking tenant calls at 3 a.m., you can figure out your real estate formula, do calculations on properties and focus on growing your real estate business.
Learn Historial Returns
If you look at historical returns across the board, you’ll see that US small cap stocks have been 12%, US large-cap stocks have been 10%, foreign stocks have returned 10%, US real estate is 10%, US oil and gas has been 8%, corporate bonds are 7%, foreign bonds 7%, treasury bonds 6%, money markets and CDs 4%, treasury bills 3%, and gold returns 3%.
It’s imperative that you understand the historical returns on what you’re planning to put your money in. We want to make smart financial decisions, and knowing the historical return is a huge part of that.
Learn to Invest with a Formula
When you are buying and holding real estate, you have to know your formula. This helps you decide which properties to invest in and which properties to say no to. You cannot say yes to every property you see, or you will get burned. Each person will have different properties that work for them, so it’s imperative you know what works for you and the market you are in.
There are three rules I always abide by. First, my total investment, including purchase price, repair costs, and acquisition carrying costs, should be no more than 80% of the real value. Secondly, you want at least $300/month in positive cash flow from each property. Third, ensure that you can 1-1.5% in monthly rents. Apply this formula to the market you are in, and you will be in a good place.
Learn to Rely on Systems
You’ve got to have a team of different players that help you becomes successful because you can’t do everything by yourself. This breeds the system. For example, the formula we just described becomes a part of the system. The team that you use becomes a part of the system. The documentation and policies that you use become a part of the system. Also, systems make sure that everyone on your team, your customers, and your tenants are clear on your expectations.
Having systems makes the decisions that you need to make easier. Good systems anticipate problems ahead of time. For example, say tenants damage a property. Before a tenant moves in, you need to outline what the repair cost is before it ever happens, how it will be charged, billed and collected. I cannot stress the importance of systems enough.
Being a resilient learner is important in any business, but especially in real estate. If you cannot learn, you will fail. However, if you combine sound knowledge, a process of learning and assistance from God, there is no reason why you shouldn’t be successful.
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