4 Ways to Remain Profitable in 2019
“In the business world, the rearview mirror is always clearer than the windshield.”
- Warren Buffett
We can all agree with this quote by the investing guru himself. Investing would be much easier if we could predict the future. All great businesses are built on innovative ideas that try to solve today’s problems for a better tomorrow. As a lender, I always ask myself, what service or creative financing structure can I supply today that people will benefit from in the future. With all the TV shows and training academy’s teaching people how to Fix n Flip homes, the market has become saturated and it will become harder to find good deals unless we all think outside of the box. Here are 4 things to consider when planning for our ever changing industry.
1.) Network, Network, Network
With so many information feeds available at our fingertips, we tend to overlook the most important part of communication - face to face. True business will always be done in person. This world is shifting to a peer-to-peer driven economy, increasing the value in making these connections early on. Learning how other newcomers are disrupting the industry will keep you one step ahead of the curve. Syndication deals are becoming more and more popular, allowing more people to work together for a common goal. Attend every highly recommended conference you can, connect with as many industry professionals on every social media platform possible, subscribe to multiple masterminding style groups, and continue telling everyone you meet what your profession is. Your network is directly tied to your net worth in any industry.
2.) Remain Flexible and Pay Attention to Trends
Great companies need to be able to pivot when market demands shift in certain directions. Real Estate is a cyclical market and we are nearing a downward shift. That doesn’t mean money can’t be made, but certain precautions must be taken, such as lowering your LTVs and focusing on rental-ready assets as a back up. With the help from technology, opportunities are not limited by your geographical area anymore. People will always need a place to buy or rent, even in a downturning economy. How can you provide a service to this new market with different demands? There’s an increasing demand for solar and other green/energy-efficient homes, how can you apply these to your investments? Many believe the traditional commission based real estate structure will be obsolete in the next 5-10 years, how will that affect your business?
3.) Be Relationship Driven
The reasons referrals are so important is because it shows your client’s trust in you. Customer service has never been more in the spotlight, technology platforms (I.eYelp, Twitter, Facebook))are the new wave with millennials. Connecting them with your professional background and client testimonials will build the trust and relationships needed to propel your business forward. Millennials are renting longer too, along with a new sharing world economy and the ability to do more on the go than ever before. Customer service has never been more in the spotlight. Technology makes it possible to communicate with people much easier, this means B2B and B2C connections will expect quicker responses. Take care of your clients, be honest in business and grow together. People want to do business with people they trust, the stronger these bonds are the stronger your business will become. This is a fast paced industry and we need to be able to rely on the different members of our team, from partner, to agent, to lender and everything in between. Relationships are everything as all business is done between people.
4.) Cash is and always will be King
Many lenders will start to lower LTVs and/or have stricter requirements for achieving high LTVs as the market turn approaches. Most seasoned investors will do the same by decreasing the loan amount they borrower. The reason is simple, with interest rates rising and values nearing a drop, we don’t want to become upside down on our note and we want to keep the interest payments low. Yes, this requires more cash and therefore possibly less deals per year, but it only takes one bad deal to throw your entire career off. Always have skin in the game, overleveraging your deals is the last thing a lender wants to see as we approach a downturn. Remember that saying no to a deal is sometimes the best investment you can make. Stay true and consistent to your methods.
There you have it, four recession proof tips that I have seen pay off for the veterans of our industry. Investing requires patience and focus. With an open mind and a strong group of mentors to learn from, I believe most can be very successful with real estate investing. Now is likely not the time to swing for the fences, but a great time to hone your craft and expand your knowledge for the next opportunity. Remember, just like it only takes one bad deal to seriously impact your career, it also only takes one smart investment to change your life.