The Seven Habits of Highly Effective Real Estate Investors

Sometimes a search through your bookshelf is like a treasure hunt. As I plucked Stephen Covey’s 1989 Seven Habits of Highly Effective People from my shelf, I believe I found some long lost gold. Flipping through the yellowed pages, I soaked in some of the long forgotten golden nuggets the book contains, and I pondered what the seven habits of a highly effective real estate investor would be.I believe that none of the habits of a successful real estate investor are particularly extraordinary. In other words – anyone could be a highly effective real estate investor if they wanted to be. Of course, this is only my opinion, and without scientific study. But here’s what I believe makes up the seven habits:Habit One: Know Your Goals”If you do not change direction, you may end up where you are heading.” – Lao TzuMost of the real estate investors I know set out with a goal. Someone I know started off simply by selling his home to buy two lots side by side and built an 8 unit townhouse complex. He has turned that project into a company that sells and builds hundreds of homes in Toronto every year. Some goals are simple, but lead to big things. Other goals are big and have to be broken down into simpler shorter term goals.Your goal does not have to be big (although I like to start with my five year goal and make smaller goals for each year to help me get to my five year goal). But I think that if you do not have any idea of what you want to achieve then your first step is going to be difficult to determine. And, you can’t just say I want to be rich. A goal by my definition has to be as specific as possible, measurable and with a time frame.Habit Two: Make Your Money when you Buy”Price is what you pay. Value is what you get.” – Warren BuffettIt’s very risky to pay over market value for a property in the hopes that the rent will go up, the area will improve, and/or the property’s value will increase. This is an entire article unto itself, but essentially you want to buy a desirable property below market value, in an area with a lot of potential for future growth. Really, it’s not unlike beginning with the end in mind. Envision yourself trying to sell that property and what, if any, problems you may encounter when you try to sell (e.g., is it such a unique property you’ll have a limited buyer pool or is it in a “challenged” location that may never improve, which will severely impact your ability to sell). If there is something that concerns you when you’re buying it, then unless you can easily fix that problem, it’s something that will likely concern the next purchaser.Habit Three: Hire HelpUnless you want to buy yourself a job when you buy a property, hire a property manager. Unless you are an accountant, hire one to help you with taxes and bookkeeping for your properties. And, in most cases, we also recommend you hire a real estate agent. Just take some time to find one that will work with you to achieve your goals. I always tell Dave that we should only be doing the things that are the highest and best use of our time or the things we really enjoy. We should hire someone else to do everything else. Of course, when I say this I am also advocating we hire someone to paint or clean our own house. These are both things that I loathe doing and feel someone else can do better and for less cost than my time is worth. Dave takes a different stance on things – why pay someone else to do what we can do for free. But, as we find ourselves with less and less time he is starting to realize he can’t do everything and there are professionals out there that can do the job better and faster than he can. So, even “do-it-myself” Dave is finally paying the experts to do what they do best so he can focus on what he does best!Habit Four: Use Just the Right Amount of Leverage”A bank is a place that will lend you money if you can prove that you don’t need it.” – Bob HopeEvery single money-making real estate investor that I have met has made money in real estate, in a big part, due to the ability to use leverage. Even the richest people will eventually run out of cash if they keep buying property. Leverage allows you to use a small portion of your own money to buy a property. The less money you put in the higher your potential return on investment. In really simple terms, if you put in $10,000 on a $100,000 property and earn $5,000 in a year your return on investment is 50%. If you had paid cash for that $100,000 property your return would only be 5%. Too much leverage equates to too much risk though, so find a balance. If you buy a $100,000 property and only put in $2,000 of your own money and the market value of that property drops to $90,000 you now owe more on that property than it’s worth.Habit Five: Find Good Partners”Keep away from people who try to belittle your ambitions. Small people always do that, but the really great make you feel that you, too, can become great.” – Mark TwainI love the success stories where someone with nothing but big dreams and a lot of initiative ties up one or more properties with contracts. They had little to no money, so while they had the properties under contract, they went out and found people who did. If you aren’t starting out with a big bucket of cash, it’s tough to make millions in real estate if you aren’t willing to partner with others. Your partner might be a family member, a friend, a colleague, a company or someone you haven’t met yet. We are millionaires from our real estate investing thanks to a couple of great partners that contributed equity to our investments along the way. We would likely only half of what we own now without them.Habit Six: Be persistent”Genius is one percent inspiration and ninety-nine percent perspiration.” -Thomas EdisonThe other characteristic of ever real estate investor I have ever met is that they never ever give up. You will hear no a lot. Get ready to face the objections and find creative solutions. In our experience we’ve been turned down by:
Potential partners not wanting to get involved in a deal we’ve invited them into,
The banks – on just about every deal we had trouble getting financing and had to deal with multiple lending issues,
Family – sometimes we try the bank of parents and we almost always get rejected but we still try because the interest rates are so favourable,
Insurance companies – so few companies want to deal with out of province landlords and it seems like we’ve been turned down by nearly every company in Ontario where some of our properties are located (we’re in B.C.),
Property Managers – sometimes the company you want to work for you doesn’t want to manage the property you own.
And even though we have been turned down by all of the above at one time or another, we keep pushing ahead to reach our goals.Habit Seven: Research – Always be learning”I am always ready to learn although I do not always like being taught.” -Winston ChurchillThe best investors are the ones that ask a lot of questions, keep their eyes open for new opportunities and do a lot of research. Many get right into the details of a city. They go to the municipal offices and pull the official plan. They get zoning details and applications. They talk to the city councilors about plans, they attend city council meetings and know everything that is happening in an area. Besides the above, many of the really successful investors will always be learning about:
Local transportation plans,
New economic forces that will impact their investment area,
Changes to political leaders that will impact the real estate values (if you don’t believe this is a critical one ask just about any investor in Toronto that owned land around the legislated Greenbelt),
House values,
Land values,
Listings to sales ratios for an area (shows sales pace and amount of supply in a market),
Latest demographic and economic trends for an area, and more.
Not every good investor I know possesses every one of these habits. And I know there are habits that many good investors have that I haven’t covered. But as I thought about the most effective and successful investors that I have met or read about, I realized that almost all of them did possess each of the above habits. And, that anyone could really do what they did if they set out to establish these habits and practices in their real estate investing.

Qualities of a Top Real Estate Broker

The real estate business sees different people playing different roles. These include mortgage brokers, bankers, home inspectors, contractors, appraisers, property managers, and several others. That’s not even counting the seller and potential buyers, for any property listed. The various contributions they make are too numerous to list, but are all very important. One thing that remains constant: it is the Real Estate Broker who ties it all together. That’s right, he or she calls all of these different people out where needed, to get the client’s needs met. They facilitate communication between all of the people involved, and keep track of the progress. So the question begs asking: what are the qualities of a top Real Estate Broker?Many people can become a Realtor of one sort or another and start a real estate career. Only a rare select few rise to the top. One of the qualities they require from Day 1? The ability to wear several “hats” at once. At various stages in the process, a great Broker alternates between consultant, buyer’s advocate, salesperson, analyst, and negotiator… to name a few. Naturally, not everyone is born with the ability to juggle all these tasks at once. Some skills are instinctual, some are taught, and some we copy from other successful people. Similar to other fields, however, certain characteristics keep coming back when top Real Estate Brokers are studied.PASSIONIt’s extremely difficult to make it in this business without a genuine heartfelt passion. Many long hours, hard work, persistence, and a commitment to long-term goals lead the list. You don’t accept so many rejections and keep working that darn hard, without passion. Enough said.ENTREPRENEURIAL SPIRITThis isn’t just about becoming wealthy, it’s the intangibles: self-starter, endless motivation, strong drive, free thinker, patience, and good instincts. Staying open to new ideas -because you’re not convinced you know everything- allows for learning. Being cooperative with other Brokers around town allows for joint efforts down the line. Putting their motivation to grow the business ahead of their ego.Being your own boss is a lot easier than it sounds, but it’s not for everyone. Only those with the desire to control their own professional destiny. To be successful in real estate requires large amounts of “guts” and a risk-taker attitude. Lastly, being persistent and tenacious, without being annoying to the other side. These are the qualities of a top Real Estate Broker.GREAT COMMUNICATORThis not only means the ability to speak freely, sound educated, or knowing how to pick up a phone or compose an email. This also refers to passing along important details to the right people, and leaving out unnecessary stuff to others. It’s a regular flow of info via phone, text, e-mail, or whatever medium the client prefers; while expressing yourself effectively on each. Saying more while using less words is also among the qualities of a top Real Estate Broker.BE POLISHEDPunctual, well-dressed, well-groomed, using proper language skills, chewing with your mouth closed, and always maintaining class and sophistication. Most of this category is superficial, indeed, but the exterior is what makes the first impression. This also includes not taking 7 other phone calls or texts while meeting your new client for coffee. Remain confident but never arrogant.PART-TIME PSYCHOLOGISTThere’s so much emotion involved in Real Estate transactions -especially residential- that removing the human element is almost impossible. This means that reading people, both in what they do and do not say, is crucial. Interpreting your customer’s non-verbal signals and behaviours allows you to better understand their needs.There is so much they will not tell you outwardly, but from the small cues you need to get a feel for:A client’s time frame. Are they in a hurry?The real motivation to buy or sell, which affects their decisions.Are they more price-sensitive than willing to admit?Who’s the opinion leader in a married couple?How much information becomes too much?Knowing when to use humour to lighten the mood.LARGE NETWORKAnother of the qualities of a top Real Estate Broker. They start with a small network of people (family, friends, etc.) but have the ability to grow it very quickly. This is done in many ways, and the most important are:1- Being a people-person, not shy to introduce themselves.2- Surrounding themselves with top professionals in complementary businesses.3- Staying true to their word as they ask clients for referrals.MOVING QUICKLYA top Real Estate Broker returns calls and e-mails at crazy fast speed, recognizing that every lead for a new client or scoop on a property is invaluable. They make immediate contact and always follow up, since time is of the essence in keeping that lead “warm”. They are the champions of quick communication and use technology all day long. IE. Not falling asleep at the switch, so their new client doesn’t think they forgot about them.PATIENCEEveryone in this business eventually learns that this is a marathon and not a sprint. Many seeds are planted, months and even years, before the crops can be harvested. Most of the cold calls for soliciting new clientele are met with a “No”, and the majority of viewings don’t end with a sale. A top Real Estate Broker also needs to deal with many interesting characters along the way: some unreliable, some dishonest, some anxious, some indecisive, and the list goes on. The most patience is needed with the clients who ask as many questions as humanly possible, then pause to think of some more. This is normal, and part of human nature. Another of the qualities of a top Real Estate Broker is the patience to answer every question and stay on the phone with nervous clients as long as necessary.ALWAYS PROSPECTINGThis absolutely has to be one of the top qualities of a top real estate broker. This refers to finding new leads, or prospective clientele, on a regular basis. How it is done could fill an entire book (or at least another article) all on its own. For the time being, let’s recognize that one can never have too many potential customers in their pipeline. The well can “run dry” for anyone at any time, and there are no shortage of ways to prospect in our times.Technology has added so many mediums to the traditional TV, radio, magazines, newspapers, and billboards. The number of web-based available tools are almost uncountable, but sufficed to say that a real estate website and strong social media presence are absolutely essential. There are also specialized lead generating platforms which could make life a lot easier. A top Broker uses all of them.BEING A “NEIGHBOURHOOD EXPERT”Local knowledge is extremely important among the qualities of a top Real Estate Broker. Not only will it save time when searching listings and answers to specific questions, it also provides immediate selling points. Nearby schools, daycares, sports arenas, churches, local shopping malls, and public transportation are great seasoning on the dish a Broker is serving up to buyers in his/her neighborhood. Knowing what developments are coming down the road is even more impressive. Future plans for a region are helpful, and so is knowing the history. Don’t get caught off guard with a question about an old burial ground or water contamination issue from last year, from a buyer who did their homework.A broker who shows they’ve never done business in that part of town looks like a beginner (even with years of experience elsewhere), and that doesn’t inspire confidence in anyone.ORGANIZED AND DETAIL-ORIENTEDThis is absolutely essential to managing a busy schedule. If a Broker can’t keep their commitments straight on an hourly basis, they’ve lost already. If electronic tools don’t work for him or her, they should keep an old-school planner book in their pocket. The more appointments they keep and phone calls they return, the more impressed their clients and contacts will remain.Attention to detail can mean all the difference in closing a sale. A top Real Estate Broker knows that the smallest changes can make a property far more attractive. They are creative with their beautiful real estate listings and take the best photographs of every home. Spotting the key details in homes they deal with can give a Broker the upper-hand in negotiations.Some of this can be taught, some just comes naturally, but all of these are the qualities of a top Real Estate Broker. Dealing with a credible and established Real Estate Agency definitely helps the odds of becoming one, or finding one as a client in your town.