Unlike a car that you purchase knowing that it will lose value, a house is purchased with the expectation that, at some point, you’ll turn a profit.
And while millions upon millions of people have bought and sold homes and profited doing so, those with a methodical approach to home buying and ownership are simply more likely to realize a higher return on their investments.
Whether you’re looking for your first home, currently own a principal residence, or want to build a portfolio of rentals, you’ll want to adopt habits that will help you achieve your financial goals faster. Here are seven of them.
Habit #1: Set Goals
“All successful people have a goal. No one can get anywhere unless he knows where he wants to go and what he wants to be or do. ” —Norman Vincent Peale
Landing on the moon. Winning the Olympic 100m sprint. Speaking French fluently. When goals are defined and clearly stated, anything is possible. The same applies when investing in real estate.
Perhaps you want to pay off your mortgage in half the time and save 100k in interest. Or, maybe you want to purchase four income properties that generate the cash flow you need to retire. Or, maybe you want to do both!
Take some time, think about where you want to be financially in the next 5, 10, and 20 years, and clearly state your goals. Then, as you achieve your goals, make it a habit to set new ones!
Habit #2: Plan
As the late Stephen Covey, author of the best-selling book “The 7 Habits of Highly Effective People” (which, as you may have guessed, is the inspiration for this article), said:
“Most leaders would agree that they’d be better off having an average strategy with superb execution than a superb strategy with poor execution.”
Simply put: to reach your goals, you’ll need to plan and execute.
Your plan will be unique to your goals. A strategy to pay off your mortgage, for example, will be focused on maximizing income and reducing expenses (so you can top-up your mortgage payments). To build a portfolio, on the other hand, you’ll need to consider ROI projections, mortgage strategies, and much more to position yourself for growth.
Often, especially with the latter, it’s worth it to speak with legal, mortgage, and real estate professionals to chart your path to glory.
Once your plan is in place, you’ll want to make it a habit to measure the results of your game plan against your goals and calibrate your approach as needed.
Habit #3: Do Your Research
“Invest in what you know…and nothing more.”
This great Warren Buffett quote speaks to the importance of researching and understanding your real estate investments.
Now, do you need to know everything about the national market, the local market, the neighbourhoods, or home construction? No. In fact, there is such a thing as “analysis paralysis” where you can overthink to the point of inaction.
But, you’ll want to do your due diligence during the purchase process and when making significant upgrades to your home to maximize profitability and avoid financial pitfalls. Research, simply put, is a routine decision-making practice that pays off.
While you’ll be able to find great resources online, it’s incredibly beneficial (and free!) to speak with experts who know the real estate market, the kind of properties you’re interested in, what to plan for and what kind of upgrades will be most profitable.
Habit #4: Stick to a Budget
As part of your planning process, you’ll want to come up with a monthly budget not only for operating your home but for the rest of your expenses: food, cars, entertainment, etc.
You’ll also want to make sure you’re factoring in wiggle room for repairs and other maintenance tasks that we covered here.
Your budget is how you hold yourself accountable to your long-term goals. You’ll want to make it a habit to stick to your budget the best you can month-in and month-out to keep your real estate profit goals on track.
Habit #5: Sacrifice
Sacrifice isn’t fun, but it will often get you to the finish line sooner.
And, often, it doesn’t take much in the way of sacrifice to dramatically increase your real estate profitability. Topping up your mortgage payment by just $100 a month, for example, could shave YEARS off a 30-year mortgage and save you A LOT in interest payments in the process.
For you, “sacrifice” could mean giving up some spare time to earn more income by doing freelance work, or cutting back on those $6 Starbucks lattes and other discretionary expenditures that add up quickly.
Envision your goal, understand how minor lifestyle modifications will accelerate your progress (a mortgage calculator will show you this in seconds), and make it a habit to find ways to optimize your game plan.
Habit #6: Leverage Technology
You’ve got goals, a plan, a budget, and you’re willing to lay off the impulse Amazon.ca shopping sprees. But, how can you make it easy to stick to your plan day-in and day-out and stay on the path to increased profitability?
There’s an app for that.
Actually, there are many personal budgeting apps that will show you how much you’ve spent, where you’re spending it, and whether or not you’re on track to stay within your budget.
Then, to make your life easier and to avoid late payment charges, you’ll want to automate your monthly utility payments.
You’ll also want to consider energy-efficient upgrades that pay off short-term, such as LED light bulbs and a smart thermostat.
And, consider creating reminders in your calendar for pre-winter furnace tune-ups as well as your other home maintenance tasks to extend the life of your home’s vital systems (and save you money in repairs).
Technology exists to keep us accountable, organized, and help us achieve our financial goals. Make it a habit to use it!
Habit #7: Think Long-Term
Much of what we’ve outlined here talks about the habits that help you execute your plan to achieve your financial goals. But, it’s also very important to make it a habit to remind yourself that real estate is a long-term investment.
Life isn’t perfect. There will be setbacks, unexpected costs, and times when you simply need to spoil yourself, get that delicious $6 latte, and deviate from your budget.
As with most things in life, if you’re faithfully executing your game plan 80% of the time, you can more easily absorb setbacks and stay on your long-term course.
Perhaps the best habit of all is to maintain perspective, shake off short-term hiccups, and remember to take time to celebrate your dedication and accomplishments along the way.