When I first started investing about 7 years ago I used to come to REIClub.com and pour over all of the free real estate investing articles and training videos. I spend my weekends driving for deals, bugging my real estate to get me in a house and stalking the MLS. I made a few mistakes and as a result I have developed my own 3 Golden Rules for Investing:
I've personally use these rules in all of my most recent real estate investing deals to make sure I don’t make the same mistakes I did when I first got started in real estate investing and hunting for deals.
Rule #1: Everyone Needs You More Than You Need Them
This may sound like a narcissistic way to go through life but when you are involved in acquiring real estate, this is exactly the approach you need to take. So many new investors think they have to suck up to the seller like he is doing them a great service when he is selling them his property. Let me give you some guidance here. You are nothing more than dollar signs to them. And guess whose dollars they are? Yours.
Believe me, you are doing him more of a favor than he is to you. This carries over to many of the other people who will be involved in the transaction, for instance, the broker. The broker is not your friend even though he will wine you and dine you. You will only have one true advocate throughout the entire process – that is your attorney. No one else is involved in the transaction to see you succeed.
Rule #2: Follow Your Intuition
If something does not feel right, it probably isn’t. If you are being put in a position that you don’t feel good about, back away. Or more directly, run as fast as you can in the other direction. Whenever I have suffered a loss or a failure, I take time to evaluate what happened and then try to understand the lessons that need to be learned from that experience. Invariably, I can always look back and remember a particular moment in time when something about the transaction did not feel right. In hindsight, I always look at that moment as the time I did not follow my intuition.
Rule #3: Always Remain in Control
I don’t mean personally, though that should just be understood. What I am referring to is being in control of all aspects of the deal at all times. Whenever someone else controlled the flow and function of the transaction, my investors and I always lost. Once we lost that control, we never got it back. It’s like playing pool against a professional. Once you miss a shot, the pro is very likely to “run the table” and you never get another shot.
Don’t miss a shot. Educate yourself so that you understand where you can lose control throughout all aspects of the deal and plan accordingly. When you send off your first Letter of Intent, you have to anticipate and be ready for all potential responses and then know exactly what your reaction and response will be to the seller.
When you review a Purchase and Sale contract, you need to understand why the seller proposed it the way they did and what that could mean to you throughout the rest of the acquisition process. It’s a chess match. It’s a pool table. This rule must permeate the entire process from start to finish. As you will see, as a rule, I draft the termination of the contract as soon as I enter into the contract just in case. Always be in control.
The more experienced I have become in my investing career, the easier it is for me to walk away from people, deals, and partners that give me that feeling that goes against my intuition. If it doesn’t feel right now, it will not feel right a year from you when you are the only one having to solve the problems on the property that you missed because you looked the other way. Listen to your intuition and I believe that you will be surprised at its accuracy. Lastly, if you are unsure of something consult a real estate investing resource or jump into an investing forum and through the question out there to get sound advice.