Setting real estate goals is the first step in achieving financial freedom with real estate investing. Whether you’re just starting out or have some real estate experience, clear goals will help you stay focused.
It’s not unusual for people to point out how the neighbor down the block has six income-producing properties when asked why they want to invest in real estate. This is called confirmation bias and behavioral psychology shows that impulse investments rarely end well. Both new and experienced investors make mistakes. Some experienced investors fall into the sunk cost trap, in which case they lose the ability to objectively assess a particular investment in relation to their goals.
Goal setting is the foundation of investing. Whether it’s for retirement, funding a child’s education, buying a specific car, earning $100K a year from rental properties, or becoming financially independent, setting your goals correctly will push you to go above and beyond to achieve them. These goals will give you a sense of accomplishment when you achieve them. You’ll also be able to assess your performance and see what you could improve.
In this article, we will examine the kind of goals you should have as a real estate investor, plus some real estate goal examples. We will also talk about SMART goals and how to set SMART real estate investing goals. Let’s get started.
10 Real Estate Goals and Objectives for Success
Real estate goals range from very modest to extremely ambitious. This is because investors put money into real estate for different reasons. While some real estate investors want to supplement the income from their day job, others simply want to retire comfortably.
Each investor’s reason for investing tends to influence their risk tolerance, how much they are willing to invest, and the financial goals they set.
The following are some of the top real estate goals and objectives every real estate investor should set:
1. Set a net worth goal
Every working individual should have a target net worth goal. You can set this net worth goal by age. By age 40, your goal is for your net worth to be twice your annual salary. If your salary edges up to 70,000 dollars in your 30s, you should strive for a total net worth of 140,000 dollars by the time you’re 40 years old. By age 50, aim for 4x your annual salary. If you have a $200,000 income, you’re in the top 10% of US earners.
Investing in real estate is a smart way to grow your net worth because rental properties can appreciate over time. Real estate investors profit from tax benefits like deductions, appreciation, and rental income. This means your small down payment on a home could potentially pay off big later. If you buy similar-type properties, you can even defer taxes using 1031 exchanges.
2. Set a goal for honing your deal analysis skills
It’s easy to locate investment properties. The hardest part of real estate investing for newbies is figuring out which investments will eventually pay off. Successful investors have mastered this skill over the years. Set a goal to analyze a set number of properties each week. You won’t invest in all these properties. But you want to develop “muscle memory” for knowing which properties would be profitable right off the bat.
When assessing a building’s ROI potential, itemize the following metrics:
- Net Operating Income (NOI): The gross income minus property operating expenses
- Cap Rate: NOI divided by the price of the property
- Cash on Cash Return: For properties that involve long-term borrowing, this is the annual cash return before taxes divided by the total amount of cash paid for the property.
- Annual Gross Rent Multiplier. Total sales price of the property divided by the annual rent. This helps you determine whether the asking price is reasonable.
- Annual Cash Flow. Net operating income minus debt. This shows your actual profit or loss from the investment.
When you understand how to assess deals, you can determine what levels of risk you want to take on as an investor. At Realwealth, you get access to expert investors with years of market experience ready to help you select the best markets for your goals and the most profitable turnkey property deals.
3. Create a goal for continual real estate education
Learning never ends. You may have heard that before, and it certainly applies to real estate investing. No matter how much experience you have in real estate, it is imperative that you keep learning and stay up-to-date on current developments.
There are numerous options available online to help you learn on the job, from podcasts, like our own The RealWealth Show and Real Estate News for Investors, to free real estate investing webinars, to blog posts online courses, and live events.
RealWealth has loads of resources to teach you how to grow your portfolio and your real estate investing net worth. We also offer very affordable live events and property tours.
4. Map out a portfolio building and diversification goal
Some investors don’t believe in diversifying their real estate portfolio. They buy one multi-family house in Indianapolis or another landlord-friendly state, and they leave it at that. They believe not diversifying keeps them safe and secure.
However, research has proven otherwise. According to a paper published in the Journal of Real Estate Research titled “Real Estate Diversification Benefits,” diversifying real estate can reduce risk by as much as 60% – 94% in US and European markets.
It seems like a lot of work to diversify your real estate portfolio, but it is crucial if you want to keep your finances secure.
You can plan to diversify your portfolio by sector (residential, industrial, commercial), geography (within a district, city, state, or country), or investment strategy.
To succeed, set a real estate goal focused on building your portfolio and a diversification strategy. Know what kind of properties you want to buy, such as single family rentals, small multifamily investment properties, new construction turnkey rentals, apartment complexes, etc., and when you want to add them to your portfolio.
5. Set a goal for growing your network
Set a goal to grow your real estate network and build your circle of influence. Developing connections is key to success in any field of human endeavor. As an investor, you should have an established network of buyers, sellers, agents, attorneys, CPAs, and property managers.
You should also make it a goal to meet people who aren’t directly involved in real estate to give you a broader view of the market and market movements. This can include tourism professionals, financial experts, and demographers.
Growing your network helps you gain deeper insight into real estate. You’ll also meet new people and get creative ideas for optimizing your investment strategy.
6. Set a goal for growing your team
If you want to grow your business past a certain level, you will need to build and grow your investment team. Your investment career success will then depend on who you choose for your team and how well they fit the job. Depending on your strategy, your investment team may consist of at least one real estate agent or a turnkey real estate company like RealWealth that can help you find inventory, a real estate attorney, a mortgage broker, asset protection specialists, an insurance agent, an accounting professional, a contractor, a 1031 exchange facilitator, and a repair team. If you are a RealWealth investor, you’ll get access to our list of trusted real estate professionals. Join to get access.
You need to clearly define who you want on your investment team, their roles and responsibilities, and how to measure and evaluate individual performance. You will need to invest a lot of time and effort to build a strong real estate team, but once you do, it will be well worth it.
7. Set a goal for investing in yourself
We generally understand investing in assets. But we rarely talk about investing in ourselves. It’s largely based on the same concept. If you invest in a business, you can increase its value and make more profit over time. Likewise, if you want to improve aspects of your life, you should invest in yourself.
Jim Rohn says, “Learn to work harder on yourself than you do on your job. If you work hard on your job, you can make a living, but if you work hard on yourself, you’ll make a fortune.”
Committing to personal development means using stakes to compel focus and action. For example, instead of setting a random goal to work out more, you would instead book your workouts three weeks ahead with a personal trainer. If you want to increase real estate investing knowledge, level up with a one-year reading plan for new investors and then proceed to an advanced reading plan.
Similarly, you’d invest in courses and coaching to tackle specific business or personal challenges using a step-by-step approach. You can also invest in one-on-one training and live instruction where you can be held accountable. Being happier and more balanced in your personal life carries over into your business.
As a side note, one of the benefits of signing up with RealWealth is that you will be connected with a dedicated investment counselor to coach you on any type of real estate deal and help you make the right investing decisions.
8. Set a goal for working less
Some investors prefer being directly involved in the day-to-day running of their business, while others would rather build it to the point where it can run with minimal direct input. Regardless of where you fall on the spectrum, set a goal to work fewer hours and run your real estate company with a more hands-off strategy.
For example, you could set a goal to hire a property management company once the number of properties grows past a certain point. You should also consider hiring a virtual assistant to help with lead generation and call handling.
One benefit of becoming a RealWealth investor is that all turnkey rental properties come with property management in place. This turnkey investing strategy is ideal for investors who want to keep their day job, but still build wealth through real estate investing.
9. Create a goal to optimize your investment portfolio
As you acquire properties and build your investment portfolio, it is imperative to take the time to ensure you aren’t managing any assets sub-optimally and throwing away profit. Setting a real estate goal for optimizing your investment portfolio is a crucial step in building a profitable business.
Set this goal early in your portfolio-building efforts to maximize real estate profit. It should be a feasible, reality-based goal, not one based on picturesque conditions. For example, doubling your monthly rental income in three months in a suburb with a high vacancy rate is largely unrealistic.
Listed below are some of the ways you can ensure that your portfolio remains optimized and profitable:
- Regular Maintenance: Frequent preventive and corrective maintenance will reduce tenant complaints. This will also keep your property safe, secure, and profitable. Properly maintaining your buildings will help ensure that you remain in the real estate business for a long time.
- Proper Tenant Screening: Take the time to screen tenants to prevent regrets and avoidable profit loss. Don’t skip tenant screening just because you want to fill up a vacant apartment quickly.
- Diversify your Portfolio: Diversifying your real estate portfolio protects you from market volatility and maximizes your growth potential.
10. Set a retirement funding goal
Lastly, you should set a goal to fund your retirement. Since you can’t work forever, you need to save an appropriate amount for retirement.
The general rule of thumb is to save 10%-15% of every paycheck in an investment account like a 401(K) or 403(B), if you have access, or a traditional IRA/Roth IRA.
Whatever your real estate investment strategy is, whether it is flipping, wholesaling, rental properties, stocks, REITS, it needs to be optimized to yield enough returns for retirement.
What Does SMART Goals Mean?
SMART is a benchmark for effective goal setting. George T. Doran popularized the acronym in 1981. SMART goals are:
- Specific: Clearly define your investing goals. This includes the expected outcomes, who will be responsible for achieving them, and the steps that need to be taken.
- Measurable: The goals must be set in such a way that certain criteria can be used to determine that they have been achieved. This implies that the goals themselves must be quantifiable.
- Attainable: Your goals must be achievable. You must be certain that you can accomplish the set goals with the resources at your disposal.
- Relevant: Your goals should be relevant to your needs as a real estate investor to ensure you build the level of financial freedom you want to attain.
- Time-bound: Your goals must have a set date for completion.
An example of a SMART real estate goal would be “to increase monthly rental income by 30% from $10,000 to $13,000 in six months.”
How To Set Real Estate Goals That Are Realistic
Now that you know what SMART real estate goals are, you need to know how to set them. The following steps will help you create goals that are realistic and attainable:
- Look inward: Carefully consider what you want and why you want it. Generally, avoid impulse decisions when setting long-term goals for your real estate business.
- Figure out current cash flow: Your current cash flow is an important factor in deciding how much you want to make. Once you know how much you make now, you can add new income streams to reach your target.
- Create a vision board: A vision board shows who you want to be and where you want to go. It gives your dreams clarity and motivates you to achieve your goals.
- Keep tracking your results: Tracking your results lets you know how far you’ve come and how far you still have to go.
Final Thoughts
Always set SMART first-year real estate goals. Definite, realistic goals that are relevant to your business and have a specified completion date will keep your eyes on the mark and keep you from burning out early.
Proper goal-setting is critical, regardless of where you are in your investment journey. But that only takes you so far. You need to set your goals, make a plan, and devote enough resources to achieving them.
RealWealth has been helping investors build wealth since 2003. We are here to help guide you through every step of your real estate investing journey, from finding and assessing profitable turnkey rental properties for passive income to hiring the right team and strategizing your next steps when it comes time to do a 1031 exchange. Become a RealWealth investor today.
