It feels as though we’ve been waiting with bated breath for interest rates to change. With the Federal Reserve finally cutting rates by a whopping half-percentage point, surely smooth sailing is on the way for real estate investors. But maybe not.
Here’s the reality: Not only is it nigh-impossible to predict the ebb and flow of the real estate market, even if we can make educated guesses, but real estate investors should never hinge on their progress or success on a single factor. If you’re always waiting for prime conditions, you’ll squander months, even years, of potential.
Stop waiting for interest rates to be where you want them to be. Take advantage of them when you can, by all means, but don’t set yourself up for failure by waiting for conditions that may never come. There are other factors at play here.
Now, we aren’t saying that interest rates don’t matter. They do. What we are saying is that investors shouldn’t hinge their portfolio on factors they can’t control much at all. Yes, a good credit score and a responsible debt-to-income ratio helps. But it’s not always enough to make a significant difference in your interest rates.
Instead, real estate investors would be wise to prioritize what we can affect and control. Here are five examples.
1. The Markets We Invest In
People tend to talk about the real estate market as a universal experience. Rarely do the things happening in “U.S. real estate” translate to every market. They’re reflective of overall trends, not actual trends on the ground.
Where you invest matters because of this. Affordability varies by city and region. So does job market strength, rental demand, population growth, and long-term prospects. The variety may be challenging to navigate and learn, but investors can find a place that fits their criteria.
2. The People We Work With
Even active real estate investors rely on other people. Passive or active, we all have vendors, partners, and professionals who work alongside us to craft a stellar portfolio.
Passive investors must be particularly invested in those they partner with. Your property management team will make or break you. Your advisors will lead you to victory or lead you astray.
Whomever you want to work with, do your homework. Ask questions. Verify information. Look for red flags.
Your partners, including the companies you hire to provide services to you, must have experience and integrity!
3. The Integrity of Our Business
Speaking of integrity: Investors should not underestimate the power of reputation. Whether you represent yourself or have managers as the “face” of your investing business, you’re sending a message to the world. It will make the difference between loyal, long-term residents and high turnover. It will prevent legal issues or lead to negligence. Value who you work with.
4. The Long Game
Even buy-and-hold investors run the risk of growing short-sighted. When we start worrying about every market change, we become no better than day traders.
We won’t pretend it’s easy to ignore daily ups and downs, or that there’s nothing to learn from them. However, we don’t obsess over them.
Real estate investors are at their best when focused on the long game. You’ll be fine if you nail the fundamentals, focus on your goals and benchmarks, and remain diligent. Market conditions are constantly changing. Fair-weather investors only get so far, but perseverance truly builds wealth.
5. The Management of Risk
Finally, investors should focus on risk management. There are two parts to this.
The first is recognizing risks and liabilities. The second part is doing your best to mitigate them. You want to minimize risk exposure to prevent losses. You do this throughout the buying process and as you hold a property. It also includes the wise stewardship of your resources, from safety nets to smart tax strategies.
If you can’t eliminate risk (and you can’t), you should prepare to absorb risks.
Final Thoughts
At the end of the day, investors may enjoy the opportunities afforded to them by the things they can’t control, like interest rates. But they shouldn’t rely on them for success. Instead, focus on what you can affect. Know what you want, and go after it!
This article is presented by REI Nation
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
