Having a network of industry pros can make your next REI project a success. A good network should include contractors, title agents, private equity lenders, attorneys, residential real estate agents, wholesale real estate dealers, and other investors.
Tip: Keep your network close by building both a personal and professional relationship with each member of your network.
2. Know Your Market.
Knowing your market is essential to investing successfully. While it is important to keep an eye on national trends it is more important to become an expert on your local market (the area in which you are investing). Knowing key statistics such as retail pricing tiers, average days on market, and active inventory numbers can help mitigate risk and ensure your next project is a safe venture. It is also important to know what we call the "Local Investor Buy Metric." This metric is used by investors to calculate margins and subsequently derive the price that should be paid for a investment house. If you do not know the "Local Investor Buy Metric" you run the risk of being out bid by other investors or paying too much for your next project.
Tip: A common "Local Investor Buy Metric" is 20% equity after renovations.
3. Make a Plan.
Developing a plan and sticking to that plan is vital to REI success. A good plan includes a rehab budget, a time frame, and an exit strategy. Once a plan is established every effort should be made to not deviate from that plan. Remember that each extra dollar spent and day wasted is money deducted from your profit.
Tip: Offer an incentive to your contractor for staying on budget and on time.