You’ve probably heard the old saying, “Real estate is all about three things: location, location, location.” I think we should throw that one right out the window because is entirely wrong. In fact, it’s wrong to the point that people who invest primarily on “location, location, location” often take significant losses. In just about any city in the country, you can drive by vacant and dilapidated buildings in great locations. If location was the key factor, this wouldn’t be the case. I am not completely discounting location, as it is important. However, I believe there are two key factors that should always come first.
1| Your Team
As a real estate investor, you understand how this type of investing is not a “one man show.” In other words, it takes the efforts of multiple people for anyone to succeed. The first determinant in your investing endeavors will be who you surround yourself with. Whether you build your own team or work with a company that already has a team in place, it is incredibly important to know the capabilities, integrity, and motivations of the people you’re working with. Consider asking yourself these questions:
Have they accomplished what you’re working to accomplish?
Do they have a good track record?
Do they have a financial interest in the success of your investments, or are they making a quick fee and moving on?
I’ve had the pleasure of working with people just getting started with their first investment, to those who have built real estate portfolios worth many millions. I’ve noticed that the highly successful investors focus on one thing first: They build their team! They figure out who they want to work with before they worry about specific locations or assets.
I’ve seen marginal teams take great properties in great areas, drive them right into the ground, and eventually lose them. I’ve also seen great teams take distressed properties in marginal areas, make them profitable, and even promote change in the surrounding area.
The most important aspect of your investment life is not your individual assets, it’s the people helping you grow and operate those assets.
2| Your Strategy
From the most prestigious and expensive communities, to the lowest income with the most crime, there are investors making money. Consider this: There is no such thing as a good or a bad market. There are only markets and each market requires the investors to use different strategies. Some markets are great for buying and holding, others for flipping. Some locations are great for buying single family houses, some for medical office buildings, and some for dairy farms.
As the real estate market shifts, many investors are finding it difficult to continue investing in their own area. If you like to invest in your own community but the market has changed, maybe it’s not a location change that you need but simply a strategy change.
Be Flexible & Open to New Strategies
Adjusting your strategy opens up new options that will allow you to invest in a variety of locations. While it doesn’t make sense to be “location agnostic,” it does make sense to leave yourself with plenty of options. Consider learning about new asset classes, new acquisition strategies, and new investment structures. Think about how you may be able to change the use of properties and add value. In short, keep an open mind and always be exploring.