2019 hasn't been my best real estate investment year. I've acquired a few new rental properties, picking up a residential property here and there, but honestly, the profit margins just haven't been there. Unexpected repairs, vacancies, and increasing property taxes have taken their toll.
Don't you hate it when the year ends up like that?
I didn't put enough down on the principal. I didn't choose exactly the right properties. More importantly, I didn't go into 2019 with a big picture approach that could have helped me achieve those important business goals. I was in reactive mode; waiting for the perfect rental property to just fall into my lap. My focus was elsewhere.
Here's the good news: 2020 is right around the corner, and this year, I'm going to get it right. This year, I'm committing to 10 steps that are likely to turn things around. These resolutions are my goal and guideposts for the coming year--and if I follow them closely, they should increase my profit margins for 2020 and help me see a greater return on my investment in the years ahead. Maybe you can learn a few things from my 2020 New Year’s Resolutions and put them to action as well.
I'm going to expand my network.
As a real estate investor, I need contacts in many different industries: real estate, of course (a great real estate agent can tell me when a property is coming up that's just what I need), but also construction (for fixing up those "great deals" that just need a little extra work--not to mention taking care of important repairs on the property), yard maintenance (someone has to keep the house looking great, whether there are renters in it or not!), and investors (who can help me learn more about real estate investment tactics--there's always something new to learn).
This year, I'm committing to attending at least one real estate investing networking event per month. I'd like to meet people more often than that--and will do my best to make those vital contacts along the way, whether that means connecting with a specific real estate company or setting up meetings with new individuals--but I'm going to factor those events into my budget and see where they take me.
I’m also going to expand my network on LinkedIn and Facebook. There are so many different Facebook Groups out there for like-minded real estate investors. LinkedIn is also chalk full of hungry real estate investors and landlords who I can connect with. My plan is to balance the digital and real world to exponentially grow my network.
I'm going to let go of properties that aren't accomplishing my goals.
Like most real estate investors, I do my best to choose my properties with care. Unfortunately, sometimes, a property just doesn't work out the way I intended.
I've mistakenly picked up a money pit or two along the way: a property that just needed more repairs than even an extensive inspection turned up, or one where I uncovered more problems every time I turned around. I've also picked up properties that just didn't rent for the amount I had expected, making it impossible for me to achieve healthy cash flow unless I put more onto the principal and re-financed.
With a diverse real estate portfolio, thankfully, my finances can survive a few mistakes along the way; but that doesn't mean I'm stuck with them, either. This year, when I encounter a problem with my portfolio, I'm going to offload houses that aren't up to par--and I'm going to learn from those mistakes to help prevent me from picking up similar problems in the future. My lesson learned is to cut loose dead weight!
I'm going to focus on maximizing the return on my investment.
One of the most important lessons I've learned in 2019 is that I have to carefully consider the full return on each investment as I purchase a new property. It's important to consider all the factors that will go into renting out the property: purchasing the property and paying the mortgage each month; any repairs that need to be done to the property; hiring a property manager to help take care of some of the details for me. I'm also going to take a look at how much I can really afford to charge for rent on each property, including what other residential properties nearby are renting for. Ultimately, my goal is to maximize the funds I have coming in while decreasing the funds I have going out to take care of each property.
I'm going to try to have more to put down on the principal.
In 2019, one of my biggest failures was my decision to put down only the minimum on several of my properties. While that allowed me to add more diversity to my portfolio--and pick up more properties along the way--it also meant that I was more reliant on having tenants in each property. I discovered quickly that the less I put down on the principal for the loan, the higher that made my mortgage payments each month. As a result, I was juggling the costs associated with each property. Maintenance requirements became catastrophic. Keeping up with the tenants' needs dropped lower on my priority list. This year, when I purchase more properties, I'm going to put more down on the principal before making those purchases.
My biggest lesson here is to avoid the thinking that “more is better”. Too many Landlords get into that mindset of trying to grow their portfolio size with the minimum down payment required (usually 20%). In 2020 and beyond, my focus will be on quality of quantity with higher profit margins. Owning 4 rental properties that are paid in full is much more attractive than owning 8 rental properties with a mortgage.
Less headaches, few tenants to call me in the middle of the night, and the same profit margins. Why would I want more, when I can have less and profit the same? It’s a no-brainer for me. Of course, the “gurus” can debate any point with reasons why more is better – but in the end, it’s all about personal preference.
I'm going to provide a high-quality experience for my tenants.
While finances are important, it's hard to bring in a good return on investment for a rental property if I can't keep tenants in it. Hunting down new tenants can be a costly, time-consuming process--not to mention leaving me paying the mortgage and taking care of maintenance on a property that isn't generating any income. In order to keep my tenants happy--and, therefore, in my properties--I'm going to provide a high-quality experience for them:
- Easy rent payment options (eCheck, Credit Card)
- A high-quality property where things work as expected
- A high level of responsiveness on my part when there's a problem
Happy tenants are more likely to stick with a landlord long-term--and that's what I know I need for financial success.
I'm going to look for new ways to diversify.
As a real estate investor, not only do I hope to increase my portfolio each year, I need to diversify it. Diverse property investments mean that if one area or type of housing doesn't do as well as anticipated, other areas of my portfolio can help support me financially and pick up the difference. I'm going to check out different types of residential properties--condos, apartments, and single-family units--as well as expanding my reach into a wider geographic area. That means that the ebb and flow of real estate value will be less likely to impact my portfolio over time.
I'm going to pay more careful attention to my budget.
It's easier than I expected to over-spend on real estate investing. It's not just a matter of mistakenly picking up too many properties. Rather, it's all too easy to accidentally over-spend on things like upgrades to the property, fast maintenance instead of quality, or services, including utilities, provided to the tenants. At the beginning of this year, I'm going to take the time to carefully look over my budget and consider where I might be over-spending. I'm not going to hold on to things--yard maintenance professionals to utility companies--just because it's the same one I've always used; instead, I'm going to look for ways to cut back on my budget without skimping on quality along the way.
I'm going to keep improving my education about the industry.
As a real estate investor, there's always something new I can learn. This year, I'm going to focus on expanding my education: following market trends, learning how to identify potential changes in the market before they happen, and how to invest my funds more effectively. I'm going to learn more about how to spot potential problems with a house and what maintenance tasks I can handle on my own--and I'm going to expand my knowledge of those maintenance tasks so that I can accomplish things more effectively when my tenants do have problems (and save a little money along the way).
I'm going to focus on smart investment principles.
There are a lot of so-called "great deals" out there that, well, aren't, once you really take the time to look at it. As an investor, I have to be constantly aware of what value each investment can add to my portfolio. Sure, that property looks like a great buy--but if it doesn't fit my known smart investment strategies, I'm going to pass.
- Doing my research before making a purchase--not buying on a whim!
- Making sure I have the right down payment in hand before making a purchase. If I don't have enough to put down on the principal, I'll let the deal go.
- Ensuring that I'm prepared for potential risks ahead of time--and not taking risks that my portfolio can't afford.
I'm going to focus on small goals that work toward my big picture over the course of the year.
Like any real estate investor, I have big hopes for my real estate investment plans. At the same time, however, I need measurable, attainable goals that I can work toward each year. I'm going to focus my goals for 2020 on my big-picture plans to help increase my odds of successfully achieving my overall financial goals.
2020 is going to be my year for real estate investing. Are you ready for it to be yours, too? If you have questions, contact me today to learn more about my resolutions and how they could help you, too.