Why are you interested in the creative real estate business? What is it you are trying to accomplish? These are two questions we all need to answer for ourselves. The bottom line is to recognize that you are in the property investment business and treat it that way. It requires planning, discipline, and execution or else it can be a dangerous and unproductive hobby.
We have been property investors long enough to experience ups and downs, a market boom and bust, changes in target markets, even changes in our own strategy. We have fine-tuned our investment strategies, focused on target markets, built our team and systems and have a pretty good handle on things. Honestly, this is a good start, but we still have to ask ourselves, “What does our business represent and deliver?”
To answer this last question we started by defining what we do and then identifying our goals. We buy properties below market value or with excellent terms in order to produce positive cash flow. We constantly seek to improve operations resulting in greater effectiveness, efficiency and value. We generate profits from rents or the sale of the property.
While this is what we do it isn’t the entire story. There are still more questions to answer. So what are our goals? How do we do what we do? What is the result? What is our real estate investment philosophy? What are the most important things that lead to our success? How will we continue to succeed long into the future? What are the fundamentals that we live by?
These are the kinds of questions that help us get closer to answering the grand question about what our creative real estate business stands for. Here is what we came up with:
1. Minimize risk and maximize annualized return – This is our goal. We first understand and minimize the risk. This includes making sure worst case scenarios are not so bad. We focus on maximizing annualized return instead of your one time return. A 10% return is great. A 5% return in one month is twice the annualized return as 15% in 6 months. That’s a big difference especially when you compound it over the long term.
2. Control and manage our success – We do not speculate, as the market is out of our control. We buy based on solid fundamentals. Appreciation is an extra bonus. The numbers must make sense on every investment.
3. Stick to our criteria – We stick to our criteria of properties with 50-70% LTV, strong cash flow and a decent area. We also seek to upgrade our portfolio by periodically purging weaker properties and replacing them with better performers.
4. Strong and multiple exit strategies – We only do deals with tremendous equity and tremendous cash flow, which results in strong multiple exit strategies. This supports our goal to minimize risk and maximize annualized return.
5. Make informed business decisions – We do not make decisions based on hype, emotion, excitement or by following what everyone else is doing. We justify our decisions with thorough due diligence, thereby making the best informed business decisions.
These 5 keys are the foundation of our business and they help position us to be successful in any market for as long as we are actively investing.
So, if I had to say what our creative real estate investing business represents and delivers in a few sentences it is this, We represent creative real estate investing done the right way. We control and manage our success, stick to our criteria, ensure strong multiple exit strategies and make informed decisions that allow us to achieve our goals of minimizing risk and maximizing annualized return.
Whether you are a beginner or an experienced professional, you should go through this exercise as well. Doing so could establish the foundation for a long and successful creative real estate investing career.
Learn how to jump-start your investing business at www.quickstart.pactprosperity.com