Success Factors For Being Successful In...

I was looking at some real estate related headlines the other day and saw one on NASDAQ.com that asked:

"Why Are So Many Real Estate Investors Going Bankrupt?"

I stopped in my tracks and had one of those "wait, what?” reactions.

Bankrupt? I don’t know any real estate investors who are going bankrupt. Especially not in this market.

Sure I knew a bunch of people that got destroyed back in the bad old days of 2006 and 2007 when the world was coming to an end...

But now?

Not one.

Do you know any investors who are going bankrupt?

I don’t think many are these days, mostly, due to what Mark Cuban says: "Everyone is a genius in a bull market.”

So I wondered, What the heck was this guy talking about?

And about five seconds later I had my answer. A friend of the author’s friend’s brother’s sister’s aunt’s cousin’s grandfather went bankrupt and had rentals. So the “so many” was really just one guy. But hey, it gave the author something to write about.

The author did make four points about being successful at real estate investing…

The Four Points

1. The first was about risk.

risk His point was that risk is inherent in investing of any kind. And that too often he sees real estate investors ignore obvious risks either because they’re moving too fast, they’re not paying attention or they’re not assessing risk properly.

Any of which will get your picture on a milk carton after you disappear from the real estate investing community.

Risk is vitally important to understand in this business.

2. The second point was about education… in that some investors don’t have enough of it.

That’s something that I really don’t buy, and in fact I think that often the opposite is true, in that real estate investors have too much education.

I think we’ll all agree that we all need some base level of education on REI before we dive into it…

But I also think we’d all agree wholeheartedly that real estate investing isn’t rocket science, and so we don’t need PhDs in finance to be successful. So I’m not buying that argument that we don’t have enough education.

3. I do somewhat agree with his third point in that many investors don’t do enough analysis.

Although I’d add that they also don’t always do the right kind of analysis.

With the explosion of the internet and blogs, it seems like there’s a “rule of thumb” about everything. And that for every rule of thumb that exists, there’s someone who actually uses it to make a business decision…

Which also gets your picture on a milk carton.

Not just an analysis must be done, but it needs to be the right analysis.

The only place you’re going to see rules of thumb is on the internet. They don’t exist out in the field where the real work gets done.

4. His fourth point is kind of silly. He says the fourth piece of being successful in real estate investing, and presumably avoiding the dreaded bankruptcy filing, is creating systems and processes and automating as much as you can, and “treating it like a business."

I gotta be honest about this one..

no-brainer In my experience, real estate investors are lone wolves who do everything themselves and most things manually. Now I do know several investors who use a ton of technology and automate and outsource, but they’re in a very small club by themselves.

And the folks who I know that do everything themselves are pretty happy, and they appear to be at least adequately profitable because I haven’t seen a single one go bankrupt, in like, seven years.

So simply doing things manually is not necessarily a “bad” thing. And it won’t necessarily lead to bankruptcy.

But I’ll agree with the author that “being serious” about your business is important. But really, who isn’t these days?

Close it Out

The author closes by saying:

“If you want to avoid losing all the hard work you are putting in (or the hard work you are about to,) pay attention to the four points in this article:

Understand that risk is a powerful but dangerous tool, so tread cautiously.
Build a solid educational foundation for yourself before getting in too deep.
Don't skimp on the math. Always understand the numbers for any property you buy.
Work ON your business, not in it. Treat your investments like the business that it is.”

Sounds pretty basic to me. And while some of it may indeed help avoid bankruptcy, personally, I think there are other factors that are more important.