The 5 questions successful investors ask themselves
The greatest advantage of Real Estate as an investment is also the greatest obstacle to achieving success in the field: The flexibility and openness with which one can approach it and find success.
Depending on who you ask, it seems Real Estate Investors all have vastly different approaches to success. As I spent more time in the arena and especially as my list of investor clients grew longer and more varied, I learned that the most zealous defenders of one approach or another were just echoing what worked for them and often this advice, well-meaning as it may be, is lacking an understanding that success means different things to different people. The approach that worked for them will only work for you if you have the same means, ends, and preferences.
How to use this guide
Read this again:
The greatest advantage of REI is also the greatest obstacle to achieving success in the field: the flexibility and openness with which one can approach it and find success.
We tried many times to write a guide that was all things to all people and realized that not only is such a goal untenable, the majority of its contents would have been irrelevant to any given reader. To avoid this pitfall, this guide is instead intended to arm readers with the ability to craft their own unique plan. It covers all of the fundamentals without getting too far into the weeds on any particular item. We will be creating a series of spinoff articles that go further in-depth on topics which generate the most questions but which don’t warrant a full explanation in a document as general as this.
You will work through a series of open-ended questions whose answers will inform the approach to answering the next. This guide will provide you with the tools and just enough advice that you can craft your own plan of attack and be successful. By the end, you will have asked yourself things which might not have otherwise occurred to you, and you will have a personalized plan built by the person who understands you best — yourself.
Firstly and most importantly, this guide will address the most often overlooked step to succeeding: defining what success looks like for you. From there we ask further probing questions to determine what will give you what you want, how to look for it, how to know when you’ve found it, how to get your hands on it, and finally, what to do with it when you have it.
Below is an index of the 5 steps to real estate success. I will be adding links to each of these sections as they are completed so be sure to check back often. If you have specific questions that aren’t answered or if you’d like clarification on anything, drop me a line. I’d love to chat.
Part 1: What do I want?
Laying the foundation for Success
Laying the foundation for success
Success in Real Estate Investing (REI) is accomplished the same way as in any venture: having clearly defined goals and a detailed plan of how to achieve them. As you will see, REI is not a one-size-fits-all program — your approach will depend heavily on what you aim to get out of it. That is why the first step to success in this field is not picking your first property, signing your first tenant, or cashing your first rent cheque. Your first step is coming up with a clear and measurable set of goals that you aim to achieve. You can’t achieve your goals if you don’t know what they are or how to tell if you’re approaching them. That is a trap that too many new investors fall into. It’s a sign of eagerness but also a sign of poor foresight that we have to nip in the bud.
In the same breath as defining your goals, you must consider whether they are reasonable given your willingness and ability to invest in yourself. Not just in terms of currency, but also two other equally crucial inputs: time and expertise. Part one simultaneously asks you to consider exactly what you are willing to put in to the project and assess whether your desired outcomes are reasonable in that context.
What are you waiting for? Take the first step toward your dream life right now.
Part 2: What Will Give Me What I Want?
Whether you’re looking to make some quick cash, develop long-term passive income, or grow your portfolio, we match your cash, time, risk, and knowledge inputs to opportunities which will deliver your desired outcome.
In essence we’re translating your abilities, intents, and desires into discreet searchable terms that the real estate machine can digest, spitting out actionable results. The end goal of this section is to create a checklist for your search based on the question “What features does a desirable property have?”
Part 3: How Do I Find It?
Automate search, Generate leads, Learn to spot a deal.
Now take the checklist created in Part 2 and set up custom automatic searches, integrate with professionals, and organize your search results to offload the effort of searching to the real estate ecosystem. If done right, you can also be the first to know when a new property hits the market that matches your criteria, giving you a first-mover advantage over your investor competitors. You will also learn how to find off-market deals and capitalize on properties that others have overlooked — this has been the hallmark of success for my investor clients, especially during a sellers’ market.
Once your search results start rolling in, learn to perform a cursory analysis in a blink to separate the wheat from the chaff. Then run a detailed analysis on only those properties most likely to work for you.
This section provides an intuitive theoretical framework for analyzing properties as they relate to your checklist, complete with the formulas and financial fundamentals. Learn to calculate cashflow, capitalization rate, return on investment, payback period, and more. But you’re not going to do a page of maths for every opportunity that comes to your inbox, so we’ll go over some basic rules of thumb that can help you analyze a property at a glance. With a bit of practice, you’ll be able to filter through your list of potential deals at a pace of about 1–2 properties per minute.
Part 4: How do I get it?
This part covers the offer and negotiation process, how to actually buy the property, and what you can do to reduce your exposure to risks from the start. We go through a real estate purchase agreement, some of the important clauses involved, and which professionals you need to work with in order to ensure things go smoothly. We also discuss what the pros do to make a project happen when others didn’t think it was possible.
Part 5: What do I do with it once I have it?
This is what comes to mind when most people think about real estate investing. This is where the right approach can make the difference between being stuck managing a flop and discovering financial freedom.
Part 5 walks you through finding and managing tenants, minimizing your workload, automating as much as possible, and making your asset work harder for you. This is where all of the prior steps pay off and it’s where the whole project starts to come together but we can’t get to all of this sexy stuff until we do all the boring research up-front.
This guide was written by Andrew Baker, Vinnie Pai, and Kangze Huang. We are working tirelessly to get all five sections of this guide finished but we want to make sure we don’t lead anyone astray. I hope you’ll forgive the Smarter REI team for taking our time in putting out sections of the guide as we complete them. If you’re eager, you can sign up to be notified as new sections are completed or connect with us via our bio links below.
Andrew Baker is a Registered Realtor and Real Estate Investment coach with a proven track record of leveraging the four unfair advantages of Real Estate for his clients. Connect with his team on Facebook and thebakergroup.ca for more investing protips and 1-on-1 consulting.
Vinnie Pai is the founder of Quantum River Property Management, A management firm for individuals and families of all backgrounds, providing guidance for creating, maintaining and growing successful portfolios in real estate.
Kangze Huang is a writer, developer, and co-founder of Rent Hero. He wrote the go-to AWS guide for developers, and has been instrumental in making the guides for Smarter REI more thoughtful and approachable. Kangze also helps Realtors leverage free tech to improve their brands.