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Expert Answers to Biz Questions
Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.
What Successful Real Estate Entrepreneurs Do Differently
The path to becoming a successful real estate investor is paved with challenges. When these challenges are embraced, they’re revealed as learning opportunities that all successful investors had to face early in their career.
To follow in their footsteps, you need to embrace continual growth. Not everyone is willing to do what it takes to grow because growth requires experiencing loss. Successful real estate entrepreneurs aren’t focused on winning at any cost.
Here’s what they do differently:
They take calculated risks
Having experience in your industry provides the confidence needed to take calculated risks. If you don’t have much experience, your risks will be less calculated, but you should still take them.
Taking small risks without experience is a learning opportunity that will teach you how to refine your risk-taking strategy. You can’t learn everything from books. You need to get in the game.
They know which resources to trust
Internet resources on real estate investing are abundant. Anyone can build a website and sell real estate eBooks, downloads, courses, and advice. Experienced real estate entrepreneurs know how to discern useful resources from the bad.
In addition to the MLS database, successful real estate entrepreneurs use trusted listing sources like Taylor Morrison and avoid sites that syndicate content from other sources, like Zillow and Trulia.
Syndication isn’t bad, but it’s a slow and inaccurate way of getting information. In real estate, timing is everything, and successful entrepreneurs rely on sources that provide timely information.
Syndication isn’t instant
Inexperienced real estate entrepreneurs are tempted to rely on real estate listing syndication websites because they’re unaware of how they work.
Bigger Pockets reported that brokerage companies have been withdrawing their listings from the nationwide real estate portals due to grossly inaccurate information. MLS listings are accessible directly within fifteen minutes. It takes up to 9 days for those MLS listings to show up on syndication websites, by which time, the property might already be sold.
Why wait nine days for a listing to show up on a syndicated website when you can go directly to the source and get your information immediately?
Syndicated information isn’t 100% accurate
Another factor that works against syndication websites like Zillow is the inaccurate home values. Zillow’s “Zestimates” are the machine-calculated value assessments that make the site unique. They don’t reveal much about how their algorithm values homes, but they do admit to a median error rate of 8%. This margin of error is down from 13.6% when the company first launched in 2006. Since then, they’ve updated their algorithm three times.
The 8% error rate is a median figure. Each city has its own error rate, but due to disclosure laws, not all error rates can be published.
Automated home value algorithms can’t determine the actual value of a home because only a human can assess whether a home is in disrepair, or has been recently remodeled. The algorithms base home value on the number of bedrooms and bathrooms, but again, an accurate assessment can only be performed by a human. Despite square footage, some homes have tiny bedrooms, poorly constructed bathrooms, and inconvenient floor plans.
Another critical reason successful real estate entrepreneurs avoid automatically generated values is because it doesn’t account for unpermitted structures. Buying a home with structures that the former owner never obtained permits to build will cost the investor. If the structure is found to be out of code, it will need to be torn down at the investor’s expense.
They know what legal paperwork to ask for
Successful real estate entrepreneurs ask for proof that all permits have been obtained for structures that aren’t accounted for by the assessor’s office or other local agencies. They have the experience to know what to ask for, and how to spot inconsistencies.
Perhaps the most important skill they possess is the ability to communicate and negotiate with those they do business with. If you’re starting out in real estate investing, use every opportunity to work on your communication and negotiation skills. You’ll lose a few deals, but you’ll gain the experience necessary to refine your strategy and do better next time.
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