Forbes recently released an article that caught our attention - “Six Skills Real Estate Investors and Developers Need to Develop”. Below you will find the original article with commentary from Caliber CEO and Co-Founder, Chris Loeffler.
Six Skills Real Estate Investors And Developers Need To Develop
Real estate can be an excellent investment, but like any investment, there are risks — and you'll want to know what you're doing before you get in too deep.
One way to do this is to talk with people active in the industry. After all, learning from people working in the field is an excellent way to gain valuable insights: They have their eyes on what markets look like, and know what sorts of skills or perspectives are needed — especially for someone still getting their feet wet.
To help, six members of Forbes Real Estate Council discuss some of the skill sets they see as critical for real estate investors and developers, as well as touch on why those skills matter. Here's what they said:
1. See Opportunities Where Others Do Not
Being a successful real estate investor or developer requires the unique ability to see an opportunity where others do not. Looking at trends in other successful markets and recognizing those trends elsewhere are key factors in identifying opportunities. A well-prepared investor will not only identify these factors but surround themselves with local experts in order to verify such trends. I would say that the most important skill any good investor or developer needs is the ability take educated risks by surrounding themselves with highly qualified advisers who can verify their entrepreneurial instincts. - Stephen Kliegerman, Halstead Property Development Marketing
Chris Loeffler: Identifying the next great real estate opportunity is part of building your network of deal sources and being able to operate profitably in different asset classes. Unfortunately, most real estate investment firms are “one-trick ponies” - in other words, they are only apartment investors or single family investors, etc. This approach forces one to take what the market has for them instead of taking advantage of the low-hanging fruit the market offers when you have the ability to explore multiple types of investment opportunities.
2. Analyze Investment Profitability
The ability to analyze the profitability of a real estate investment is probably the most critical skill a real estate investor should have. It's not enough to rely on others to do this for you. If you're investing your hard-earned money you need to be able to critically analyze the profitability of any real estate investment on your own. - Ben Grise, Grise Home and Property Group
Chris Loeffler: Underwriting a real estate investment, both from the standpoint of anticipated equity performance and the ever-changing world of obtaining quality debt financing, is the difference between a good deal and a great deal. In addition, in the world of real estate it is not a matter of if something goes wrong but when something goes wrong. One’s ability to anticipate potential cash needs and quickly set up the necessary reserve accounts to keep the asset operating at optimum efficiency and profitability is key. Making sure you have multiple-exit strategies in place if the property, or outside market forces, alter your initial plan is also important.
3. Learn From Successful People
Success in real estate investing requires unquestionable ethics, tenacity and the ability to deeply connect with people. I've been successful by following the people that are successfully doing what I want to be doing and learning all that I can from them. I started out by investing passively while I held a full-time job. That way, I learned the business with minimal effort and risk. - Holly Williams, MQ Ventures, LLC
Chris Loeffler: Emulating successful individuals, finding worthy mentors and clearly defining the kind of reputation in the “small world” of real estate you wish to achieve is critical in developing your business. One of the reasons Caliber spends so much time and effort educating our fellow investors on the real estate market and how we approach various real estate deals (through our monthly meetings, calls, and webinars) is so they feel empowered in their ability to understand and emulate our process if they wish to do so independently.
4. Develop The Ability To Look
I know it sounds obvious, but approximately 5% of the people I have worked with are able to observe deal metrics, and not listen to brokers or get emotional about "the deal;" these people are also the most successful people I know. This includes the ability to be detail-oriented and fully understand every aspect of the development process, so risk can be avoided properly. - Meg Aubale Epstein, Ca South Development.com
Chris Loeffler: The most important person you will ever listen to on a deal is yourself. The initial instinct you get on a property, or the person bringing you a deal, should be carefully observed. One of the methods we have found to be most successful over the years is to rely on the numbers, which while sounding obvious in nature, is not always followed. Many investors try to make deals something they are not by manipulating figures to fit a pre-ordained hypothesis. In other words, let your figures tell you what the property is - not what you want it to be.
5. Do Not Pay Attention To External Distractions
Being able to execute a plan, rather than reacting to external influences, is critical to long-term success. Every day you will encounter distractions and you have to not pay attention to them at all. - Brad Moree, Moree Law, PLLC
Chris Loeffler: One of the reasons Caliber handles the entire investment process in house is to allow us to execute our asset plan at the lowest costs possible. Additionally, we are able to avoid the volatility of outside interference. In today’s 24-7/internet/cell-phone/blog/twitter/LinkedIn/Facebook world it is easy to be swayed on the “state of the market” or “what is going to happen with real estate because of XYZ” – this often leads people to forget why they did a deal or had a certain strategy in the first place. Remember, opinions are just that and that doesn’t necessarily make them right.
6. Vet Partners To Avoid Risk
Ability to vet partners and avoid transactional deals. As a real estate investor in commercial syndications, you can avoid a lot of risk by investing with partners (operators) that you have vetted, have one niche that they focus on and a market that they know well. I avoid transactional deals that come to me from operators and markets that I'm unfamiliar with. - David Thompson, Thompson Investing, LLC
Chris Loeffler: This is a big one. On both the individual client and corporate partner level, who you associate yourself with can have a major impact on your success and influence how you are perceived in the marketplace Because of the illiquid nature of real estate, you may find yourself tied to someone you either do not like, do not trust or do not wish to be associated with for a very long time - proceed slowly. Do as much due diligence on any partners that you can prior to working together, and then, start small and always give yourself, or the deal, a way out. Ultimately you will never know someone until you work together – so find a way to work together on small projects before you partner on something significant.