Since I began in real estate in 2000 I have been looking for keys of how money is made in residential real estate. Over that time I have found a few. Many are obvious, some not so much.
Modern world is all about making things more efficient, and behind the theory is money to be made by those who can do something faster, better.
In residential investing I have found there to be 5 areas where even slight efficiencies can make a big deal in long term gains. They are:
- Investor Education
- Situational Evaluation
- Market Location
- Investment Isolation
- Investment Evaluation
INVESTOR EDUCATION – If residential investing could be analogous to automobiles, then it is learning how to drive the car. Not how to be a mechanic. Most drivers can’t change a radiator, but changing a tire might be useful. Instruction on the basics – motion – and how to avoid hitting something would be the focus.
SITUATIONAL EVALUATION – What does an investor want? What purpose would that serve? Guiding the individual investor to identify their priorities so they will know what to look for in a win.
MARKET LOCATION – Lots of places in the world exist and no 2 areas are exactly alike. Which areas of the world will bring properties more likely to fit the needs and wants of the investor.
INVESTMENT ISOLATION – Once looking in a market what types of investments will best fit? This part is taking the hundreds of available properties and narrowing down to a couple dozen.
INVESTMENT EVALUATION – Next step is from the dozens to the few. Which investments stand apart as the best ones? And Why?
Over the years we have found that asking the right questions, having the right priorities, and leveraging technology can, more than any time in the past, narrow our field of vision to what matters most so we can find investments than will out perform the field long term.
I should add, it is not just about using algorithms to make the right decisions, because we are dealing with people. So we use algorithms to assist expert people to make the value decisions that matter.