Real estate investors have to work the angles to succeed in this competitive industry. Think of the three things needed in every successful real estate investment business as the three sides of a triangle: deal flow, management and capital. While we must develop each side of this triangle, it’s the synergy that comes from working the angles between the sides that brings success.
Deal flow is where it all starts. Without deals, you have no real estate investment business. If you’re just starting out or working at it part-time you may have a sporadic deal flow because of your uneven marketing. Focus on consistent marketing so that you’re a closing on a steady flow of deals. Create a steady stream of deals coming in. Even if you can’t do every deal that comes your way, it’s better to pick and choose (and maybe hand off deals to other investors that you can’t do).
One of the biggest problems facing real estate investors who are consistently closing deals is: running out of cash. They’ve leveraged their personal financing as much as they can, they’ve maxed out at the bank, and they’re turning most of the profits back into the business. The only thing stopping them from doing more deals is lack of capital. Build strategic partnerships with hard money lenders to help you access enough capital to do more deals and to fund them through to completion.
Of course you can’t just have deal flow and capital—you need to be able to manage everything in your business (from the deals coming in, to how you’re using the capital, to how you’re building for the future). Are you able to efficiently manage a rehab project while acquiring your next house for rehab and while preparing to sell the one being rehabbed? It is not as easy as seen on TV. Many flippers fail to manage well and ultimately this will limit their deal flow. The management of your business needs to be as finely tuned and scalable as the other two sides of this triangle.
Growing Your Investing Business
As your business grows, it’s important to keep building up all three sides of the triangle. Rest on your laurels just because you have new capital from a private lender and you’ll be in trouble. Projects running behind schedule and over budget will interfere with the deal flow and make it harder to obtain capital for the next project.
When you work all three sides of the triangle, you can do far more business. You’re able to work the angles to your advantage. If you have access to capital and you’ve proven your ability to manage you will be able to land good deals.
Build all three constantly and you will grow an effective, profitable investing business.