Real estate investing is a challenging business. You may have heard from advertising claims and get-rich-quick schemes, that investing in real estate is very simple and you could reap the rewards instantly. The truth is, it is neither quick nor easy. But it is a proven way into wealth and able to give you an inflation-proof method to grow retirement and other accounts. Becoming a successful real estate investor requires a certain amount of experience, knowledge, planning, and skill. So, before jumping in, answer these six important questions and then you can better see how you should approach the industry.
1. How much do you know about the real estate industry, market, terminology, and so on?
It’s critical to have the skill to spot a good deal on a property, but successful real estate investing requires knowing more than that. As an investor, you’ll need an excellent grasp of what drives markets, changes to laws and regulations, current trends, and warning signs. These are some things you’ll need to have mastery over. If what you know isn’t complete, it’s a good idea to first learn all you can about real estate investing. After getting a good grasp of these things, you can then plunge in and purchase your first rental property. BiggerPockets.com and other websites like it have a wealth of information and resources for new investors. There are also dozens of how-to books available, as well as articles and videos.
2. What kind of financial skills do you have?
Investing in real estate is different from investing in stocks or other securities. There is a financial skillset and lingo used that is different from other industries, and successful investors need to know it to be able to make good deals. Suppose someone wants to get into investing in rental properties. They would need to know how to analyze a potential property for cash flow, estimate repair and maintenance costs, calculate anticipated rental rates based on current market conditions, the amount of your expected return (both long- and short-term), and more. Now, if you think your knowledge of real estate financing isn’t complete, then it would greatly help if you learn more.
3. Do you have a clear vision for your real estate investing business?
If you own a rental property, you are in the investing business. And, as is true to most businesses, yours will benefit from having a specific set of goals and a detailed plan of how you intend to achieve them. If you haven’t made one yet, create a business plan that will help you articulate the big picture and defeat any minor problems. It’s also critical to create an exit plan before you need it. Ultimately, real estate investing isn’t just about getting in; it’s also about knowing how and when to get out.
4. How comfortable are you with risk?
All investments carry some degree of risk. Real estate isn’t exempted. While the risks in real estate investing are different from other types of investments, there will still be a few wrinkles in your plans. It’s not immune to Murphy’s law— something can and will go wrong. It’s a good thing that there are opportunities to mitigate the inherent risks by deciding in advance what kind of real estate investor you want to be. A good strategy many rental property owners have is to develop a niche, purchasing similar properties. It’s a pretty smart strategy especially if you take to account that their experience gives them a deep understanding of one particular kind of investment property. If you are fine with high-risk investments, you may want to gamble a bit more on higher-priced properties, or those in high-rent areas. For those who are more averse to risk and would rather have a bit smaller but surer profits, less expensive rentals in stable neighborhoods might be the better option.
5. How strong are your interpersonal skills? Can you work well with others?
At its center, real estate investing is a business that relies on relationships with other people. There will be a large team of real estate, mortgage, and home remodeling professionals that will work with you. That’s normal for any real estate investor. And so, one of the keys to investing success is being able to bring a great team together. This means finding honest people who you respect and who understands your communication style. When you observe successful real estate investors, you can see that they leverage their trust in other people to help them do a lot more in less time. This enables them to complete the many tasks that real estate investing requires, and complete them quickly. They also engage in networking opportunities and trade referrals as a way to solidify and build mutually beneficial business relationships with others.
6. Who is going to manage the property?
The older group of real estate investors were mostly owner-landlords. This means that a vast majority of them invested in and then managed their own rental properties. This was in the past but, currently, this trend is declining. That’s because this approach tends to limit your investing potential. What happens is that you get restricted to a small geographical area. Using today’s real estate platforms and with the rise of national property management companies such as Real Property Management One, investors can buy rental properties just about anywhere. You no longer have to be limited. There are nearly 300 quality property management offices nationwide and they are all willing to care for and lease your rental properties no matter where you find those great deals.
In Conclusion
To be a successful real estate investor, you need to have the best available information, experts, and tools. For this reason, Real Property Management One offers a free rental property assessment to investors looking for their first investment property. To get this free service, don’t hesitate to contact us online or ring us at 925-495-4953.
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