What serious real estate investors do that average investors do not

Most everyone I talk to about real estate investing has a desire to build a nice investment portfolio.

The interesting part is few people actually talk about the journey or the desired destination.

Most simply talk about the immediate deal they are looking to invest in with little thought into how this investment will integrate with their investment portfolio.

Aha moments and investors

I write about individual investors and how they bought a single investment property. Also, I write about people I have helped build million-dollar portfolios.

An interesting picture emerges on the differences between these two types of investors.

Average investors focus on buying one property, then wait awhile to see how it goes, and then perhaps, if all is well, someday they may buy another property.

Often they will change their investment strategy to buy a different type of property to see what it looks like on the other side of the fence. They will dabble in this and dabble in that — basically shooting from the hip to see what happens.

The serious and seasoned investors know what they want as their intended outcome.

Using baseball as a metaphor and investors

Good batters hit the ball where they want it to go.

They look and focus on the defensive players. And then on the area of the field, or over the outfield fence, where they want the ball to travel and land. They swing and the ball travels in that direction, which is deep into the outfield and beyond. Their plan is to run to first, second and third base then back to home plate where they started to complete the journey.

4 things serious and seasoned investors do

Serious and seasoned investors have this same approach when building an investment portfolio.

They have the entire picture in mind. Constantly scanning the field and the players, knowing when to move and when to pause and when to take a break and watch for the next open opportunity.

Nothing gets in the way to their journey back to home plate.

They know what the journey to their home plate looks like, such as one of my investors who wanted to acquire at least 10 properties in his first year of investing.

He knows his first purchase is simply his first base and part of the pre-planned journey to home plate. He does not wait until he gets to first base (his first closed deal) before strategizing his next and subsequent investments. Momentum continues until the entire goal is accomplished and he is back to home plate.

4 things serious investors do

1. They begin as they plan to proceed: Knowing where they want to go, and how to get there, keeps them focused every step of the way on the end result.
2. They strategize on how one base is a bridge to the next base: As they are in the process of acquiring a property, they calculate how this property will integrate within their portfolio. Also, what goals of the portfolio this investment accomplishes and what the expected goals of the next investments will be. They maintain a sense of purpose to each investment. Typically, like the case of the gentlemen who wanted to acquire 10 properties in his first year, this is acquiring a couple of very strong cash-flow properties with built-in equity. This allows you to build up cash reserves and then acquire a couple of stronger equity-building properties.
3. They continue to leverage their accomplishments along the way: Every investor’s goals and cash positions are different, but often the case is to leverage your first buys and get cash out to continue to build your portfolio with more property.
4.  They protect their investments with safe leverage: Many overly optimistic investors miss this important element. Having a safe six-month reserve built up for each property is paramount to sustaining the portfolio. Many investors at some point in their investment career (present company included) tend to overleverage and back themselves into a corner where they are equity-rich and cash-poor. This will stall the game.

3 things average investors do

Average investors in this metaphor have a goal of hitting a single and getting to first base. And, they become comfortable there. Often they will set up camp there until some sort of encouragement motivates them to get up and move on to second base. Sometimes it is years before they try for second base, and occasionally they stall out completely.

1. Focusing entirely on that first investment: Without any long-term plan in place, they hear of the successes people have in real estate and want to play as well. They get blinded by each shiny object that comes along and often fail to take any action, missing opportunity after opportunity.
2. Buying one property and getting stuck: The first property is the hardest to acquire. Once you do, it is important to keep the momentum going. It is understandable that often you need to replenish your cash supply. But it is imperative to stay in the game. You need to keep learning and researching the next possibility so you can strike when the opportunity presents itself. While it is great to have one property under your belt, it is the economies of scale and leverage that make investments worth owning. I have a brother who became so frustrated with managing the two properties he owned that he eventually sold them to lose the headache. He was unable to create duplicable systems to make the investments easy to own and to manage. This is why it is so important to stay in the game and always consider yourself a buyer of investment property. This mindset will keep you alert and focused on building a portfolio rather than just owning a property or two.
3. Chasing the next shiny object: I have seen probably 50 percent of the investors I talk to get paralyzed with this problem. Clearly, this is lack of an end game plan. Hearing about this investment strategy and then that investment strategy has you running around, looking at everything and buying nothing.

Figure out what you want, share it with your real estate power team and focus on the end game.

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