Over the past 30 years I have had the opportunity to work with many commercial real estate investors. Some investors have been the “one and done” type of clients but other investors I have had the privilege of assisting with their financing needs on several occasions over the years.
What I’ve noticed is that highly successful real estate investors have several habits in common. They:
1. Have A Simple Approach to Analyzing CRE Opportunities – Each investor has his own methods of analyzing a deal but surprisingly most have a relatively simple set of parameters that they use as their guidelines for making their go/no-go decisions for purchasing commercial real estate. Rarely do they employ the more sophisticated methods of evaluation such as the net present value of discounted cash flows or internal rates of return.
2. Have a “Big Picture” Approach to Investing – they don’t get caught up in the minutia of the deal. Rather they step back and look at the big picture or the 30,000-foot view in order to effectively make the right decision. In many ways, their decision making is more of an “art” than a “science” and because of it they’re able to pull the trigger much faster than those who over analyze their opportunities.
3. Listen to a Core Group of Advisors – Some successful real estate investors go it alone relying solely on their own expertise. But most have a team of advisors. They realize that their area of expertise though valuable, is limited, which requires that they rely on the proven counsel of others in order to reduce the risk of making a poor investment decision. Their team may include some or all of the following:
a real estate broker
a mortgage broker/lender
a general contractor
a property manager
They usually have no more than two to four advisors making up their advisory group. These advisors are considered an invaluable part the investor’s team and many times these advisors become minority owners in the transaction. The successful investor has learned over the years to trust his team’s wise counsel in their specific area of expertise.
4. Monitor Their Investments Regularly – Successful investors vary greatly on how involved they are in the day-to-day affairs of their properties. Some are totally “hands-on.” They enjoy the property management side of the business. Most delegate the day-to-day decisions to a property management company. But all highly successful commercial real estate investors closely monitor their properties’ monthly operating statements. They believe in the saying, “You get what you inspect, not what you expect.” They usually focus on two or three metrics: the vacancy rate, capital repairs, and the last time rents were raised.
5. Are Always Seeking Out New Opportunities – A common theme among successful real estate investors is that they are never in the market for a new property but they are always in the market for new opportunities. They are continually keeping their eyes and ears open for another good investment. The point of this habit is that whether they are in the market to buy more properties or not they want others to consider them a serious player so when the right property comes along they will be notified of the opportunity.
Bottom line: Highly successful commercial real estate investors don’t just invest in commercial real estate; they live commercial real estate. It’s their passion. They can’t think of anything they would rather do than to hunt for the next deal.
Source: 6 Weekly Habits of Successful Real Estate Investors; by Chris Clothier, www.biggerpockets.com/renewsblog/2013/, November 27, 2013.