The 3-Part Roadmap to Real Estate Success
Buying and investing in real estate successfully is similar to buying and investing in the equities market successfully: There are about a million different ways to do it.
While that’s liberating in many ways, it’s also daunting. A million ways? That must mean there are a million ways to fail, too.
But here’s the silver lining: By watching others do it successfully, you can take away the lessons you need to make sure you get it right. Here are the top-3 keys:
1. Keep An Eye On The Big Fish
Market players are not created equal. There are small fish and there are bigger fish. Every move the big fish makes creates a ripple effect that you can either ride out or be blindsided by.
An excellent indicator of growth is what I call the catalyst investor. A larger developer that focuses on a specific neighborhood or plan and begins to take action. Once the buying starts, pay attention.
Usually, the developer is local, not national or institutional. They know the city, the area, and the local political players. Zoning and approvals happen so often there’s a lot of lead time if you’re looking in the right places and at the right players.
Neighborhoods and cities grow and change by and because of these local, influential developers. Usually, there is only a handful of them, even in bigger cities. By the time Starbucks shows up, it’s too late.
2. … And The Little Fish
Last week, I had a conversation with a successful developer of single-family homes.
He’s a little fish watcher. Like when you see a school of them swim by, all changing direction in unison.
His entire business model relies on understanding where sales activity is moving so he can buy and build where people will want to buy in the next year. In other words, finding and tracking many little fish.
He watches and tracks activity to see where volume is moving: building permits, tax abatement applications, sales, new financing. He looks at the smart data to see where the masses are moving, buying, building and borrowing, so he can sell where people want to buy.
3. Know The State of The Seller
Knowing where to go is the first major challenge. Finding who is the next one. Buying right means understanding who the most motivated sellers are and focusing on those individual deals.
In fact, the emotional or financial state of a seller is an important – if not somewhat elusive – factor in a real estate transaction.
Just because a market is healthy or a powerful third-party is knocking on the door, doesn’t mean the seller will be easily swayed. A person’s life circumstances tend to predict how they’ll make a decision much more than market conditions.
Back taxes, liens, judgments and other debt, divorce and more can be valuable motivators, but this information is specific to the property and person who owns it. How can you glean more information about an emotional state or motivations to sell?
Public record data can be the most valuable tool in lead generation if you know where and how to get it and understand how to use it.