5 Tips For Setting Achievable Real Estate Goals
People that are truly successful—and not only in business, but also in many other pursuits—are those who create a plan that leads to success. They set aside time to write down the goals that define their own personal success, and then strategize the steps they’ll have to take to achieve them.
When it comes to goal setting, business and life coaches often refer to the S.M.A.R.T. system, which helps guide people in making their goals achievable. The S.M.A.R.T. method works particularly well if you are investing in commercial real estate. Read on to learn what S.M.A.R.T. stands for and what else you can do to increase your chances for success.
Investing in commercial real estate presents a lot of options—office buildings, a retail strip center, multifamily housing and the list goes on. You’ll do yourself a favor when you specify your goal. So instead of writing, “Invest in commercial real estate,” write, “Purchase three small office buildings in the next five years in order to generate enough cash flow to pay for my daughter’s college education.”
Set a Measurable Goal
If a goal cannot be measured, then how will you know whether or not it has been met? A measurable goal is one that’s quantifiable, such as a designated number of properties you will buy or an expected return on your investment. An example is, “I’m going to purchase four investment properties, and I will maintain at least a two point spread between the cap rate and the interest rate on the loan.”
You Can Reach an Achievable Goal
Ambition and enthusiasm are great qualities to have as a commercial real estate investor, especially if you’re starting out. They can certainly help you take your best shot at meeting goals. However, if a goal is unachievable, then all of the ambition and enthusiasm in the world won’t be useful. Setting an unattainable goal might be a recipe for failure that will inhibit your resolve to try again. So, instead of planning to make six figures on a real estate investment, set an achievable goal such as, “I want to purchase a property that makes more money than it costs to hold—positive cash flow—and that has good appreciation potential.”
Make sure goals are realistic. This requires knowledge of your available resources, including money and time. You can’t expect to start from humble beginnings and achieve great wealth after one real estate investment. Similarly, there are only 24 hours in a day, so don’t plan on managing and maintaining rental properties in order to cut costs and still hold down a full-time job. Take an honest accounting of your resources and create goals that reflect the money and time you really have available.
Time for Success
Deadlines keep people accountable. Therefore, set timed real estate investment goals, both short- and long-term. Short-term goals are like landmarks along your path toward success. For example, a realistic short-term goal might be following up on 20 property investment leads by the end of each month. These kinds of goals add up to progress toward a long-term goal, so you’re not cramming to meet that deadline.
Other Habits of Successful CRE Investors
In addition to writing down your S.M.A.R.T. goals, there are other steps you should take to help you achieve success. Here are a few suggestions:
Find a Niche. As mentioned above, there are many ways to invest in commercial real estate. Choose a niche, focus on that and you’ll be able to gain detailed knowledge that will help you create a strategy to attain your investment goals.
Know Your Market. Successful real estate investors spend time learning about their markets and keeping up with changes, whether those are job growth or contraction, mortgage rates, consumer preferences and more. Knowing the current market conditions can help you plan for the future and possibly see potential opportunities on the horizon.
Understand the Risk. Investors in the stock market know that there is an inherent risk—the value could go up or it could go down. Frequently, however, advertisements for real estate seem to suggest that your investment is a sure bet. A wise investor knows the risk attached to a specific deal. Determine your risk tolerance, and then you’ll be able to make an investment decision that is prudent.
Build a Team. There are so many aspects to investing in real estate that it almost always pays to have a team of professionals working on your behalf. Network with other investors to find a lawyer, accountant, commercial realtor, property manager and others who can help you.
Review Your Goals. Finally, writing down your goals is an essential step. But you must review them periodically in order to track your progress. Reread your S.M.A.R.T. goals every month, and honestly reflect on how you’re doing. If necessary, make changes or think about what else you could do to make your goals a reality.
The information contained in this article is general in nature and should not be construed as financial, tax or legal advice. As with any financial or legal matter, consult your tax advisor and legal counsel.