I won't even try to convince anyone who wants to own a multimillion-dollar real estate portfolio that they can easily do so within a few years. In the process of acquiring a multimillion-dollar investment portfolio over the last nine years, however, I've developed the unshakable conviction that following these guidelines can optimize any real estate investor's chances of success.
1. Have a strong vision.
Before setting your eyes on the prize, understand what the prize is. Decide what asset class and type of property you're looking for. At the very least, commit to a diversification ratio that's realistic. For example, I have a 60/20/20 rule that breaks down into 60% of the company's investment dollars for multiunit residential properties, 20% for vacation rentals and another 20% for private equity real estate funds.
2. Gain lots of grit.
Understand that any multimillion- or billion-dollar venture is a 24-hour deal. I used to think that being successful in the hospitality industry would allow me to sit back and simply reap the rewards. I was dead wrong. As the expression goes, more money, more problems — or, in this case, more responsibility. Be prepared to be on call for issues that arise, and understand that no one will have more incentive to handle them than you.
3. Get connected.
Relationships are the key to success in real estate. When you've targeted and gained a strong network of professionals to whom you can also provide value, they will gladly keep their eyes out and help you find the best deal. Consider either starting or joining a mastermind group. This is where a group of individuals committed to helping each other succeed meets on a regular basis to discuss their goals and challenges. It's a simple concept that carries powerful results.
4. Filter your search.
If you want to have the right network of people spreading out their tentacles, putting out feelers and perhaps even investment dollars out there for you, be clear on what you're looking for. Similarly to when you conduct an online search, filter out the ambiguity. At a minimum, decide what location, price range, property class and usage you're looking for.
5. Consider all financing options.
Often, we make the mistake of thinking one must be inherently well off before initiating this type of venture. Remember that most of the millionaires or billionaires we know of established themselves with the help of others. And now that you've gathered the mental and social stamina to reach your goals, it's time to really hustle for those dollars. Fortunately, when investing in real estate, there is a range of options available for garnering capital, which include equity and debt financing, investing with family or friends, joint ventures, starting a blind pool fund, and seller financing. Investigate all these avenues while becoming zealous about investing other people's money (OPM) responsibly.
6. Acquire with prudence.
When you're investing on behalf of other investors, do so prudently. Once you find a deal that piques your interest, thoroughly research the appropriate market value for that deal. Ask yourself what economic factors are at play that may or may not allow the seller to obtain their asking price, and then use that as a bargaining chip. Thanks to the internet, all the information about a property is not only available to a real estate agent or the seller. You owe it to your private investors, and your own pockets, to take advantage of this access.
7. Stay out of trouble.
Although we don't intend to expose our assets to liability issues, the risk is always there. This is another area in which establishing relationships with a business network is important. My own network of professionals, for example, introduced me to my company's legal counsel, who, in turn, helped me understand what type of insurance we need to be covered for any liability issues that arise. Our counsel also guided us on what security measures we need for our asset class and helped us stay out of a number of risky ventures that would have quickly become pitfalls.
8. Manage operations efficiently.
From an investment perspective, establishing efficient operations is not only about having a good management team; it's about saving enough money to put away for the next deal, especially when your goal is to grow your portfolio. This means delegating operational duties so that you have enough time to grow the business, rather than run the business. It also means ensuring that staff members are guided in a unified direction and everyone is held accountable for mismanagement that ultimately eats into the company's profit margin.
9. Leave a credible footprint.
Whether you've acquired one property or 10, there are many ways in which your business can make its mark as a credible brand. Partner up with nonprofits that support causes that align with your company's mission. For example, one of the gaps that my company aims to fill is providing affordable housing to those who may not have access. To date, my company has been awarded recognition by various local authorities, which is not only humbling for our team, but also builds a brand worth investing in.
10. Think outside the box.
I've learned that the chances of success with real estate investing improve when we don't rely on conventional means. Can't raise enough capital for your first investment? Try subleasing and hosting a few short-term rental properties. Can't find any good deals for multiunit properties? Invest in a mobile home park. Can't find the right staff or clients? Partner up with nonprofits that share your company's mission.
The point I'm trying to drive home here is that if you want to reach for the stars, don't rely on NASA to get you there. Like Elon Musk, figure out a way to create your own transport.