Setting goals in any area of life is challenging, however the process navigates the planner towards worthwhile accomplishment. Real estate goal setting plays an important role for any real estate investor looking to achieve long term success.
The Importance of Real Estate Goal Setting
As a new real estate investor, it’s easy to succumb to the “shiny-penny” syndrome. We focus on the latest and greatest deal, without seeing how this “shiny-penny” fits into our long-term goals. Many successful real estate investors use the S.M.A.R.T goal system to set their goals.
In the S.M.A.R.T goal system, goals must be:
Using the S.M.A.R.T. goal system can help any investor narrow their focus and get the most out of their real estate investments.
Goals Must Be Specific
The term real estate investing covers a wide range of investing styles – fix and flip, wholesaling, turnkey investing – and real estate types – single-family, multi-family, commercial.
Creating specific goals can help an investor stay on course. Here are some specific ways to go about real estate goal setting:
Non-specific goal: “I want to make money investing in real estate.”
- This goal provides no direction about how or where money will be made.
Specific goal: “I want to purchase ten single-family rental properties in the next 36 months that generate enough cash flow to replace my current annual income.”
- This goal is specific, and it provides a timeline of when it will be achieved.
Goals Must Be Measurable
It goes without saying: Everyone wants to make money on an investment. Investors don’t invest to lose money. A measurable goal is something that can be quantified, like a specific number of properties that will be purchased or the return on investment that an investor expects.
Here are some examples of how to get to measurable real estate goal setting:
Un-Measurable goal: “I want to be the top real estate investor in my area.”
- This goal is unmeasurable simply because it doesn’t really mean anything. A top investor could be the one who closes the most deals or the one who has the most monthly income.
Measurable goal: “I want to purchase 4 investment properties with a 6% or higher annual rate of return on investment.”
- While this may seem so simple, that is the beauty of a measurable goal! The point is to have a benchmark to measure against. When an investor sets their goals, they can easily check to see if they are on track or not.
If goals aren’t measurable, they simply can’t be met. Setting a goal that can’t be measured is just like setting an un-reasonable and un-attainable goal, it does more harm than good.
Goals Must Be Attainable
Ambition is every real estate investor’s friend. It’s the trait that drives an entrepreneur to be successful. But real estate investors need to remember to keep their goals within reach. Creating unattainable goals only sets an investor up for certain failure that may hinder their desire to try again in the future.
Unattainable Goal: “I want to make $100,000 on my first real estate deal.”
- While it is possible to make $100,000 on a real estate transaction, it’s not always attainable – especially for a first-time investor. Factors like market demand or properties available can impact this goal. Focusing simply on “the big number” should not be a part of real estate goal setting.
Attainable Goal: “I want to secure a property with positive cash flow and potential for appreciation.”
- This is an attainable goal because an investor can control where they buy and the price they pay.
Goals Must Be Realistic
Goals can hurt an investor when they aren’t realistic. Unrealistic goals are a lot like unattainable goals. However, an unrealistic goal goes beyond “out of reach” and into “impossible.”
Unrealistic Goal: “I want to manage all my rental properties and fix and flips to cut down on costs, all while working a full-time day job.”
- No matter how motivated a real estate investor is, they can’t add more hours to the day! This goal simply isn’t realistic – attempting to build a real estate investing business with no outside support.
Realistic Goal: “I want to maximize my profits through partnering with the best team of property managers.”
- It is still possible to achieve positive cash flow while working with a property manager. If the numbers add up, an investor can still realize positive cash flow while outsourcing the day-to-day work to property manager.
When taking part in real estate goal setting, a reasonable investor should take inventory of their resources and set goals that correspond to the time and money they have on hand.
Goals Must Be Timed
Many real estate investors work for themselves, so timing goals is critical. By setting timed check-ins, investors can ensure they are meeting their goals. Here are some examples of how to create timed goals when real estate goal setting:
Un-Timed goal: “I want to call as many leads as possible.”
- This goal isn’t timed because there is no end date. Is this a daily goal, a weekly goal, a lifetime goal? In addition to not being timed, this goal is also un-measurable.
Timed goal: “By the end of month I want to call 20 leads.”
- This goal gets points for being both timed and measurable! Setting a monthly quota for leads is an excellent way to parcel out all the work that goes along with investing in real estate.
Timed goals are especially important for investors who work in teams. They add structure to the dynamic world of real estate investing. Many investors jump into real estate investing with the long-term goal of financial stability and independence, and timed goals offer a roadmap to achieve that goal.
Goal Setting for Real Estate Investing
Taking the time for real estate goal setting can feel tedious, but it is crucial to being successful. The process of goal setting is only the first step for a real estate investor to get set up for success. Once goals are set, investors need to develop a strategy to accomplish their goals. Take the next step and create a business plan to keep your investment goals on track.
Download our simple real estate business plan and build a roadmap to achieving your goals.
This article is for informational purposes only. For information specific to your investment situation, consult with a qualified tax adviser, CPA, financial planner or investment manager.