Investing Is A Numbers Game
By Paul Esajian on October 25, 2013
Marketing is widely perceived to be a numbers game. The more people you reach, the greater chance you have of making an impact. Subsequently, the same can be said about investing. The numbers you are confronted with will ultimately determine your success as an investor. Each set of numbers in your business will determine how often, where and who you do business with. These are the numbers that you use on every deal and in every stage of investing. They are right in front of you without even knowing it.
Pay close attention to the following numbers, as they are the most important part of your business:
1) Number Of Deals: The more deals you work on, the more likely one of them is to close. Marketing and lead generation are each the epitome of a numbers game. You literally increase your likelihood of closing by adding more deals to your pipeline. Even the best investors will lose deals. That is just part of the business. By working on more deals, you simultaneously mitigate the risk of having one fall through while increasing profit margins.
2) Numbers On Properties: The numbers you run when evaluating each individual deal will tell you how strong it is. Sure, there are times when you will trust your gut, but more often than not, a good deal is determined by what your calculator or spreadsheet determines. You can fool yourself into plugging in unrealistic or inaccurate numbers, but you will get out what you put in. If a property will only rent for $1,000 and you think you can squeeze $1,250 out of it, you are going to be in trouble. Numbers rarely lie when you look at a property.
3) Number Of Units: One of the first things you have to determine, after deciding where you want to invest, is what types of properties you are interested in. Many investors focus exclusively on single-family properties while others will only look for multi-families, mixed use and commercial properties. Whatever your strategy is, the number of units will determine down payment, cash flow and exit strategy. You can always change after you have closed a few deals, but the number of units will dictate where and how you invest.
4) Number Of Contacts: Many investors forget that they are running a business. The best businesses focus on the contacts within their network. The more contacts and people you meet, the more opportunities you should have. Between local networking clubs, investing websites, social media and investment club meetings, there are plenty of opportunities to put yourself out there and meet people. How often and how effective you are at networking can make your business much easier or much more difficult.
You don’t need to be a math major to know that numbers are an important part of investing. Before you get started, or as your business develops, take a step back and see how your numbers are doing. On every deal, every day, your numbers will tell the tale of your business.