Despite popular opinion, real estate investing isn’t based on your sales acumen. While success in real estate certainly relies on talking to people and buying their homes at the right price, there are several areas of expertise that are more important than your ability to negotiate.
So if you’re ready to discover how to become a better real estate investor, here are the three most important skills for real estate and how you can start honing them right now!
#3: Comping
As a real estate investor, your job is to buy properties at a low price and then sell them for as much as possible. So if you don’t know how to evaluate what your deals are worth, you’re playing a guessing game every time you sign a real estate contract. Not only is it impossible to maximize your profit this way, but you’ll also place yourself at risk of losing money on your deals.
Comping is the solution to this problem. It involves finding recently sold properties that are similar to your deal-similar square footage, lot size, property features, and location-and averaging their price per square foot. It’s a skill that takes time to master, but getting started is fairly simple.
One way to make the process easier is to use a comping tool that’s backed by home sales data. All you need to do is select your deal and the platform will find matching properties and even calculate their average sales price for you. This makes learning comps much faster and easier than if you had to drive around and manually identify them.
See how easy comping can be when you have a reliable tool and accurate data.
However, there’s still a skill element to comping that you need to develop. Just because you can easily find properties that are similar to your deal, that doesn’t mean they’re accurate comparisons. There are several factors that can influence a property’s after repair value and make identical properties worth vastly different amounts of money. These factors include arteries of traffic, sides of the street, proximity to activities, ease of access, and surrounding neighborhoods.
So if you want to master the comping process, relying on your lead generation platform alone won’t cut it. The best way to improve at this essential real estate skill is to spend time practicing it and bidding on houses. You can also work with a mentor, watch experts on YouTube, or get a copy of our free e-book, where comping expert Jamil Damji explains how investors should think about and approach comping their deals.
#2: Identifying deals
There are more than 140 million residential properties in the United States and most of them would make terrible investments. That’s why knowing how to identify opportunities while filtering out everything else is a priceless real estate skill.
To develop this skill, you first need to understand the characteristics of a good investment. Typically, a profitable investment is both attractive and discounted. You can spot these properties because they have one or more of the following features:
- They’re owned by motivated sellers who need to sell as quickly as possible
- They have enough superficial damage to lower their sell price without requiring extensive renovations
- They’re in attractive neighborhoods or close to attractions that people want to live near
- The owner/s has high equity
If a property is neither attractive nor discounted, then you’re going to overpay for a house no one wants to live in or buy. If it’s attractive but not discounted, then you’re working with a standard house that could sell on-market. You’ll buy it at close to full price and won’t be able to make much money off of it.
If a house is discountable but not attractive, it may still make a good investment, especially if you’re going to rehab it or sell it to a visionary cash buyer. Finally, if the house is both attractive and discounted, then you’ve found an especially great deal because you can buy it at a below-market price and then flip it for a markup without doing a lot of additional work.
Once you can reliably place every property you see on a regular basis in one of these four categories, you’ll be well on your way to mastering this real estate skill. Of course, to truly evaluate a home, you’ll need to see the inside, which takes an appointment.
There are also some home characteristics, such as specific damage or hidden repair needs, that will take an expert’s eye to notice and diagnose. Developing this kind of vision will take time, but if you make it a habit to pay attention to the little details when you visit a property, you’ll eventually learn what to look for.
#1: Building relationships with real estate professionals
Without knowing the right people, it’s nearly impossible to build a long-term career in the real estate industry. You may succeed at landing and selling a few deals on your own, but if you don’t learn how to leverage your communication skills to connect with real estate agents, investors, and contractors, you’ll struggle to scale your business.
On the surface, this may not seem like an essential skill set. But a well-established network can help you generate leads, create joint venture opportunities, and make every aspect of buying and selling real estate easier.
In most cases, networking involves a short call or email, but you can also build your network by:
- Going to local real estate meetups
- Attending foreclosure auctions
- Dropping a gift basket off at your connection’s office
- Taking someone out to lunch
In the end, the way you build your network isn’t important as long as you build relationships with people you trust and like working with. Simply put, your connections will define your long-term success. If you can identify people who have relevant local knowledge, finding and evaluating deals will become much easier.
Conclusion
When people think about the skills required to be a successful real estate investor, they usually think about selling and negotiating. These skills are certainly important, but real estate is primarily a technical field. If you don’t learn how to comp, evaluate deals, and work with other people in your local real estate market, there’s a limit to what you can accomplish as an investor.
However, these top skills aren’t difficult to learn. While you can devote decades to mastering all of them, you can start learning them right now and quickly become proficient. There are almost no barriers to entry in real estate, and as long as you’re willing to work hard and learn these three essential skills, you can begin building a lasting business today.
