Three Characteristics of a Savvy Investor
1) Establishes Clear Goals
- Time Frame: A Savvy investor runs the numbers and has a time frame for how long to hold a property based on the next two goals.
- Expectations: They have a realistic approach to the Future appreciation of a property and those expectations will typically be based off on logic and data. They do not try to hit a home run each time they step to the plate. Instead their plan includes a lot of times at the plate and a continuous flow of base hits.
- Performance: Ask a great investor what type of performance they look for and they will tell you exactly what works for them. They have this return expectation down to a science, because if the performance works, the expectations work and their time frame for owning or flipping is met.
2) Grounded in Logic
- The Property Fits the Plan, Not Vice Versa: Experienced investors create a plan that is profitable and then find a property that fits the plan. Novice investors put a plan together based on the type of property they think they want and then they try to create a solid investment plan for a bad investment property.
- Good vs. Bad: Savvy investors understand that holding a bad investment does not make it a good investment. If property is good at the beginning it will perform well and be profitable when it is old. A property purchase wrong will always be wrong.
3) No School Like Old School
- Makes the Decisions on the Now Versus the Potential: In past markets, investors lost sight of the current performance and made decisions to buy based on the potential for future appreciation. For a period of time it worked.
- Plans for the Down Versus Hoping for the Up: Today a buyer/investor buys a property that makes sense, plans for, and is okay if there is a downturn in value, cash flow, etc. in the future; and does not include potential appreciation in the strategy. If it happens, market upside is simply a bonus.
- Has Exit Strategy B and C for Flips: When flipping properties a novice buys, improves, and tries to sell. If any of the variables that are typically out of the buyer's hands change, the flip doesn't happen and there is significant risk to the buyer in owning that property. Savvy investors will buy properties to flip, with a second and a third exit strategy if the flip doesn't work.