Defining Your Profit Strategy

The biggest difference between seasoned investors and those that are relatively new may be a sense of appreciation. While everyone enjoys a profit, experienced investors both appreciate and welcome even small profits on a deal. Conversely, green investors are often blinded by what they see on TV and think that high profits are the norm. Like most anything else in the real estate business, there are many different strategies, approaches and goals that are used by different investors. Whatever your strategy is, you can be successful using it. The key is to get an idea of which way you want your business to go before you get started. What type of profits you desire will directly impact which types of properties you look at.

Of course you want to try to make as much as you can on every deal. However, reality can be harsh, as home run deals don’t usually come around more than once a year. With the number of investors increasing exponentially and recent changes in the market, those once a year deals should be cherished and appreciated. You have a much better chance at trying to close five deals with a targeted profit of $10,000 than one deal for $50,000.

If you put all of your eggs in one basket, you will get in trouble when that basket breaks. Diversification is the key to investing. However, you don’t necessarily need to diversify the types of properties you invest in. The more properties you work on, the less chance you have of loosing all of your profits.

There is a misconception that less expensive properties will yield smaller profits. You can make a good living focusing solely on properties under $75,000. Whether you are wholesaling them or flipping them at a discount, cheaper properties are a very viable option for investors. It can be frustrating working on a property for months while serving as the point man for every issue, only to walk away with less than $10,000. This is still a nice chunk of change, given the amount of hours you have actually worked. Individually, a property with these numbers is anything but exciting. However, a portfolio of 10 similar properties will yield incredible returns.

You need to accept that this may be how your business is going to be run for the foreseeable future. Working on properties with smaller profits can be frustrating at times, but you greatly reduce your risk and exposure. As long as you know and are comfortable with the risks going in, you can live with the results.

Define your strategy before you look at any properties and accept the ceiling of your profits. Alone, the property may not look all that appealing, but in addition to others of a like nature, it will result in nice yields.