The losers included rehabbers who got stuck with properties for which they paid too much and then could not sell. Buy-and-hold investors saw their tenants move out to share housing with friends or family members. That forced them to lower rent prices to attract new tenants, which, in turn, cut into their cash flow.
Yet there were many investors who survived and even thrived in the past decade. This large disparity between successes and failures is the very reason I spent the last 10 years identifying what these seasoned investors do differently. There are a number of differences, but today I can sum it up pretty simply. The single most identifiable difference that I noticed between average and seasoned investors is the seasoned investors “See it Big, Keep It Simple.”
Just What Does SIBKIS Mean?
Like most investors, these successful, seasoned investors know what they want out of their investment dollar. They crunch their numbers on the income and expenses. They look at property and only buy the good deals.
Whether new or seasoned, most investors all follow the same routine up to that point. But then the differences start to materialize.
Seasoned investors most definitely apply the principles of SIBKIS (See It Big, Keep It Simple).
Many average investors, however, tend to complicate things.
Risky Business Behavior
I continue to see two mindsets with most average investors: They either force an investment or abandon the idea. Both behaviors are risky.
When some investors are ready to invest, they shop the available properties and buy the best one they can find. When they find great property, all is good. However, when they cannot find property that fits their investment criteria, they adjust their criteria because they believe it is no longer obtainable. So they settle for less-profitable returns. Often they will overpay for a property just to acquire one and figure that in time the values and cash flow will rise.
This is where many faltered when the Recession hit. The cash flows did not rise—in fact, often they fell—and equity also was stagnant or fell.
These folks who do not stick to—or perhaps never had—set criteria put their investment dollars at risk. A different type of risk faces those who do not see what they want so they simply abandon their idea altogether.
These investors see big things—they know their niche, whether it is fix-and-flip, buy-and-hold, whatever—but they forget to keep it simple.
What Sets Seasoned Investors Apart?
So, what do seasoned investors do that average investors do not?
They understand that market position is paramount to having great investments. When too many investment dollars are chasing the same product, it often indicates that the market positioning is coming to an end. Instead of adjusting their investing criteria and settling for less, these investors simply adjust where they invest. They know that real estate is all about location. To an investor, that means the location that is most economically viable to buy right today and which will provide the longest duration of sustainable cash flow and equity growth.
SIBKIS—to the seasoned investor, this means seeing the big picture and not deviating from the intended outcome. Keeping it simple means establishing your criteria and sticking to it. It means making only minor adjustments to the strategy, but never adjusting the investing criteria.