Values and mindset drive success. Experience, skill, and network are the external representations of that success. All-star investors have a clear map of the terrain and a path to reach their destination. The following traits of the most successful investors may not be comprehensive. Still, they are foundational to establishing long-term success as an investor.
All-star investors are:
These are important values individually, but the combination is more valuable than the sum of their parts.
Investors are engaged in a perpetual search for hidden value. They are always seeking knowledge and understanding to enhance their search. Curiosity drives that search.
Curiosity is like a pearl. It starts with an imperfection – usually a parasite – within the clam. The clam coats the irritant in many layers of fluid as a defensive response. Over time and many layers, the pearl takes shape.
A variety of concepts and thoughts catch your attention as you go about life. These may be passing comments or something you hear on the radio that sparks an interest. Sometimes, this goes in, marinates for a minute, and falls to the back of your subconscious. Other times, it drives an immune response to learn more and fill in the missing pieces.
The most successful investors do not leave this process to chance. They actively seek enlightenment from a variety of stimuli. These people seek wisdom from common and uncommon sources. They explore beyond their comfort zone for value in other disciplines.
You can start by reading, listening to, or visiting something that is outside your daily routine. For example, a hotel operations expert may start by learning about capital structures, while a capital markets expert may go deeper into revenue management. A more ambitious plan would be to go far beyond your area of expertise to biology, engineering, or marketing, for example.
Highly successful investors approach a deal and imagine what could be not just what is or was. The best among them communicate that vision to effectively align a team behind that vision.
Having a vision is only one part of being visionary. Your dream has little impact beyond what exists in the confines of your mind. We live in a physical world, and dreams become reality through action.
The first step in making your dreams a reality is to take the action of communicating it.
Financial models, business plans, and conceptual discussions with a partner are a few tools in this communication. The key is to get the dream out of your head and into the world with the most effective means.
Most people don’t share their ideas out of fear of someone stealing them. This risk is real, and it is a clear and present danger. However, good ideas are abundant. Ideas without action are worthless.
Implementation, not the idea itself, creates value. Your customers are not paying for your conceptual plan. They’re paying for the result from hiring you or buying your product.
The most successful investors don’t come up with better ideas more frequently because they have some natural ability. It takes curiosity to develop a concept and a constant struggle to refine your vision. Train this muscle by stepping into a daily creative practice of writing, drawing, or programming.
Your visionary capacity expands every time you create something new.
There are a variety of reasons to pursue a real estate investment, but financial return is chief among them. Even if you are pursuing other goals, like placemaking, affordable housing, or environmental impact, you must have a good sense of how you will define success.
Business plans formally document an if-then hypothesis. That is, if we do “this” then we will get “that” result. Some real estate investment can jump right to that simple statement. However, many require a more elaborate examination of the potential risks and their mitigation to reach such simplicity.
Warren Buffett is known for saying that you should only invest in things that you understand. He notes that all the best deals have a simple explanation. This is true, but the reality is that execution is complex. A solid understanding of the complexity and a good team allow you to simplify to a compelling one sentence business plan – if this then that.
A logical process that leads an investor from steady state to an investment decision requires advanced analytical ability. Most real estate investors avoid anything “analytical” because they find the associated concepts challenging, like math or programming. However, most people have a basic analytical ability that becomes stronger with practice.
Analytics is two parts technical and eight parts communication.
Your ability to influence people with your logical connections is only as good as simplifying it to their level. Nobody has the same skillset or mindset that you have. You need to adapt your concepts to fit a more standard way of thinking. This is the core competency of a skilled salesperson or astute marketer.
Integrity is a common core value for many companies. And for good reason. Integrity is a moral compass. It provides guidance when your back is against the wall and you need to make a quick decision that could materially impact your company. However, it falls short in fully describing what most of these companies are really seeking.
Integrity assumes that all options are binary – black and white – but most decisions in life have shades of gray. You have an infinite set of reactions to any situation presented to you. For example, the way you say yes or no can have a big impact on the result. You’re left in the wilderness beyond the strict moral code that integrity provides.
Honor is an appreciation of the moral values paired with the desire to maintain a highly moral reputation. This permeates every area of your life. It is the nervous system of your social interactions. External perception of your actions defines your honor.
Nobody ever achieved anything great in a vacuum. Your reputation is essential to building a team, strengthening relationships, and engaging your network. Integrity is fine for making yourself feel good, but honor will help others feel good about working with you.
Investing money is scary. That fear doubles when you put other people at risk.
Hotel investing involves an operating business with tens of employees depending on you to pay their salaries and provide a path to professional growth. It takes immense courage to get past that fear.
Your business plan’s assumptions are benign while they’re still on paper. They become painfully real when the seller accepts your offer. All the productivity systems in the world cannot make up for the gut strength that you need to take on the responsibility of an owner.
Fear is natural, and it is good for you. Fear triggers stress hormones and other physical reactions that sharpen your concentration. It forces you to think through and create contingencies for all the potential negative results from your decision. However, when it comes time to decide, courage beats back those fears and takes the course that you know is the right one.
Courage is doing what you know is right in the presence of immense fear and self-doubt.
It’s easy to live in a fearless world. It’s comfortable. But, there is no progress if you don’t step out on a limb and risk failure. That takes courage.
Nobody knows who you are, and frankly, nobody cares. That goes for your goals as well. People and the companies they work for are interested in one thing – maximizing outcomes for themselves. This means you need to find a way to improve their outcome to maximize your outcome.
Curiosity, vision, and reputation can only go so far. Beyond that you need to take massive action to align with key stakeholders and achieve the goals you’ve set for yourself.
Relationship building and bringing an owner to the negotiating table are the two most difficult periods in sourcing a deal. It takes consistent outreach and creative problem solving to get to that point. The process is mechanical after you start negotiating a deal.
Challenges met and overcome in making a deal happen is the measurement of a great deal story. The best stories are those around the deal sponsor overcoming some adversity from getting a hold of the deal to financing it and beyond. This is the rightful glorification of courage and persistence.
Persistence comes into your life in two ways – willpower and systems.
Willpower is the most difficult way to be persistent. This method forces you into a struggle or fight. It is draining, and it only has so much staying power. Use willpower only for infrequent or unusual situations.
Systems are a solution to most situations where persistence is critical. Technology and tools that automate tasks and remind you to act ensure consistent follow-up and exposure.
Be stubborn, creative, and flexible in your approach.
The traits of the most successful investors become well-defined over time. Nobody is born with these values, and even those that possess them must know how to combine each to create magic. Still, thorough study and practice will help anyone reach legendary status.