I really believe it is smart thing to study others who are successful in the field you desire to be successful in. Don’t you? With that said, I have observed, experienced, and gathered seven wealth-building habits for apartment investors. Pay close attention to them as some of them are counter-intuitive to traditional real estate training and investing.
This post continues from my last one, where I showed you Habit #1, #2, and #3. Go back and read those and take them to heart.
Habit #4 – Patiently Acquiring and Having Tolerance for Mistakes
• Rome was not built in a day. Building a good-sized and wealthy portfolio requires years to build and is built one property at a time. Successful apartment owners take their time and strategically plan out their acquisitions over a period of years. The real estate cycle and market conditions have to be just right in order to make the best buying/selling decisions. Time and timing are the keys. The average real estate cycle is ten years in length, so give yourself at least that to build your Rome.
• Have you noticed that life tends to have built-in provisions for the mistakes we make? The most successful apartment owners that I personally know, made huge mistakes in the past that have brought them literally to their knees, but the most successful ones bounce back to do even bigger deals. The moral of the story is…it’s human to make mistakes, but it is also human nature to be overcomers.
• Allow yourself room and grace to make mistakes. It is the highest form of learning there is.
• This next sentence here should probably be the 8th habit. It is to learn how to manage growth of your portfolio. How many well-known companies do you know that were absolutely terrific when they were small in size, but now that they’ve multiplied in size, are now failing their customers and have lost their identity? The same can happen to you or worse if you don’t stop and take a deep breath before you decide to add to your portfolio. Bigger is not better (or richer), but instead strive to be a lean, mean, apartment-operating machine.
Habit #5 – Effectively Partner
• Proverbs 15:22 states, “plans fail for lack of counsel, but with many advisors they succeed.” Throughout history, no one has achieved impossible dreams or built amazing companies without effective partnering and/or outside advice. When you really think about it, there is no such thing as a self-made millionaire. Somebody somewhere at some point helped or advised that person.
• The apartment investment business can be very dynamic with lots of moving parts to it. Don’t be average over a lot and master of none. Do what you do best and hire out the rest to the best.
• Successful apartment owners know the value of relationships. Success is a relationship business. Finding the best deals, solving the biggest problems, and finding the money for your deals come from relationships.
Habit #6 – All Business Systems are Accountable
• Well-run and profitable apartment investments seem to go under the radar. But what you will hear more of are the apartment communities that are failing or are in deep trouble. Upon deep inspection, you’ll find that the troubled apartments have a key component to their operation that has stopped working. And that failed component has caused or will cause other facets of the operation to fail down the line soon. Nonetheless, a profitable apartment business has nearly every business component running at good to satisfactory levels.
• Successful apartment owners have excellent internal communications and accurate financial and operational reporting. Their systems allow them to hold their apartment’s business systems accountable to those responsible. Here is a sampling of typical apartment business systems: accounting, revenue, internal controls, property staff, marketing system, maintenance, and marketplace.
Habit #7 – Well-insured and Entities are Set Up For Maximum Protection and Tax Strategy
• “Plan for the worst and be happy if it doesn’t happen” is the attitude and habit of the most successful apartment owners.
• Their goals are to build a legal fortress with strategic insurance coverage and with the use of well-thought out entities such as LLCs, LLPs, Corporations, TICs, Trusts, etc.
• A poorly protected investor may not only lose his or her properties to a real or frivolous lawsuit, but personal property as well. As of 2006, there are over one million attorneys in the U.S., all wanting to deploy their skills (on your property!).
• Before doing any of this on your own, consult an asset protection attorney and tax strategist first.
• What good is it to be a brilliant real estate investor, but not being able to keep your money? Poor tax planning will take the wind out of any investment venture, so pay for good tax advice. Paying the cheapest price for tax advice will be very expensive to you.