For every real estate investor, the end game — your ultimate goal — must always be in sight. To be successful in real estate investing, you must have a goal, criteria to get there and the network to guide you in the journey.
1. Set Your Goal
First comes your goal. It has always been in my nature to dream huge. Not just dream big, but huge. What could ultimately bring you happiness — $10,000 in cash flow per month? OK, now think bigger: What if you could achieve $15,000 in cash flow per month? Could you travel more? Could you donate to charities near and dear to your heart? Could you retire at 40 and put time and energy into another passion in your life? Don’t limit yourself. Set your goals high.
Determine what you’re in the game for. Do you want specifics amount of cash flow per month? Do you prefer to focus on obtaining a net worth of $5 million? Whatever it is, you must assign a number and, more specifically, what it is (cash flow, net worth, number of properties, etc.). Once you’ve assigned a goal, assign a time frame. If you plan to achieve a cash flow of $10,000 per month within five years, you’re going to have to hit the grindstone heavy. If you want to build up a portfolio over 10-15 years, you can create a plan that allows for slower progression. Be specific. To be clear, setting your goal as “I want to be rich!” is not useful. What becoming rich means to Warren Buffet and Bill Gates is likely very different from the average Midwesterner’s definition of rich.
2. Establish Your Criteria
Second, select your criteria to get there. Without criteria, you’re shooting blindly in the dark, just buying properties that may or may not get you to your goal. Based on some of the goals I mentioned above, here are some potential criteria to follow.
• Cash flow: If the goal is to build up to a certain amount of cash flow, you need to evaluate potential deals based on the cash flow they’re producing. Certain aspects like the property value or what class neighborhood it’s in may not be factors in your evolution. That is not to say they should be ignored, but they should not be the first filter you put the property through. If you plan to achieve your goal in a short amount of time (five years or less), you will need to look at properties in lower-class areas, as these generally have better cash flow.
• Net worth: Your personal net worth is everything you own minus everything you owe. If cash flow really isn’t the most important factor in achieving your goal, you won’t need to place as much importance on that aspect. Look for properties with high property values and finance as little as possible.
• Number of properties: Although this isn’t a goal I recommend, for some, it is the ultimate goal. It can be a status goal to be able to say you own 200 doors or 150 properties in 10 states. However, number of properties doesn’t always translate to wealth. Regardless, if you have a high goal in this category, you will want to look for low purchase prices and leverage as much as possible. The reason this goal can create issues financially is that you can own 100 properties, but if they have very low property values and cash flow, you’re ultimately losing at the real estate game. If you do choose to select a number of properties, I recommend combining it with a cash flow goal (i.e., “My goal is to have 10 properties cash flowing at $400 or more per month in eight years.”)
Other criteria you will also want to add to your personal deal filter include number of bedrooms, number of bathrooms, square footage, construction type (brick, vinyl, wood, etc.), neighborhood class (A, B, C, D) and market or city. This is not an all-inclusive list. You will most certainly want to determine your personal criteria and what you deem acceptable. I do stress criteria because you want to limit your funnel. If you set your criteria in advance, you will be able to filter through potential deals quicker and be more selective in what you purchase. Don’t purchase the shiny widget if it doesn’t meet your criteria. It will slow you from reaching your goal in the end.
3. Build Your Network
Finally, build the network that will help you succeed. You will want to have three different categories of your network. The first, and possibly the most important, is mentors and other successful real estate investors. These individuals have played the real estate game and are continuing to win. They’ve been through ups and downs and are thriving. They will be those who are looking out for your best interest and want to see you succeed.
The second category includes real estate agents, turnkey rental companies, property managers, wholesalers and other real estate professionals. These are the people who will help you reach your goal. They are trusted and verified sources of knowledge who have been working in real estate and investing and can help get you to your ultimate goal.
Lastly, the third category includes contractors, special tradespeople, attorneys, accountants and other professionals who may not be specific to real estate investing but will be huge players in your success. This network, if built with the right people in place, will be a crucial piece in your real estate game.
The great and wonderful aspect of real estate is it can be accessed by nearly anyone and can be a fantastic avenue to financial freedom for everyone. However, to win the game, you must begin with the end in mind. Set yourself up for success from the get-go, and winning the game becomes a matter of playing the hand you created for yourself in a systematic way.