Real estate investing is a challenging business. You may have gathered, from advertising claims and get-rich-quick schemes, that investing in real estate is really easy, but that just isn’t true. Real estate investing is neither easy nor quick. But it has been shown again and again that it is a reliable pathway to wealth— an inflation-proof way to grow retirement and other accounts. Becoming a successful real estate investor requires a certain amount of experience, knowledge, planning, and skill. This being the case, it is really important that you ask yourself these six important questions before jumping in.
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. If it’s your goal to be an investor, then you’ll need to have an excellent grasp of what drives markets, changes to laws and regulations, current trends, and warning signs, among other things. If what you know about real estate investing isn’t complete, then it’s probably a good idea to first learn all you can about it. After getting a comprehensive education on it, you’ll be better equipped to make your first purchase. The internet has a wealth of information and resources for new investors. There are websites like BiggerPockets.com that can really help. There are also dozens of how-to books, articles, and videos available for anyone who wants to learn.
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. For instance, someone investing in rental property would need the skill to pick apart the details of the deal being offered. 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 all businesses do, 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 drafted a business plan yet, create one that will help you articulate the big picture and solve any minor issues. It’s also good to have an exit plan even though you don’t need it yet. It’s important to stay prepared. This is because real estate investing is not just about buying properties to get in; you will also need to know how to get out at some point.
4. How comfortable are you with risk?
All investments carry some degree of risk. That risk is also present in real estate. 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. Thank goodness that there are opportunities to mitigate the inherent risks when you decide in advance what kind of real estate investor you want to be. One strategy that rental property owners employ 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 can tolerate high risk for that huge reward, then you may want to gamble a bit more on higher-priced properties, or those in high-rent areas. For investors that are more averse to risk and want to go the safer route, less expensive rentals in stable neighborhoods might be the better option.
5. How strong are your interpersonal skills? Can you work well with others?
The nature of real estate investing is that it really is a business that relies on relationships with other people. As a real estate investor, expect a large team of real estate, mortgage, and home remodeling professionals to be working with you. It follows then that finding people who understand your communication style and forming a team built on integrity and respect with them is one of the keys to investing success. If you observe successful real estate investors, you can see that they leverage their trust in other people to help them complete the many tasks that real estate investing requires. This allows them to accomplish a lot more with the least amount of time. 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?
In the past, real estate investors invest in and then manage their own rental properties, making the vast majority of them owner-landlords. This was back then, but the prevailing strategy has since changed. The explanation for the change is that this approach tends to limit your investing potential. Instead of being able to invest anywhere in the country where the market is favorable, you will be limited to a small geographical area— within a short driving distance of where you live. Using today’s real estate platforms and with the rise of national property management companies such as Real Property Management Talent, investors can buy rental properties just about anywhere. You no longer have to limit yourself and are free to chase the best deals where ever they show up. There are nearly 300 quality property management offices nationwide that are ready to take care of and lease your rental properties.
In Conclusion
Real estate investors that are successful all have the best available information, experts, and tools. For this reason, Real Property Management Talent offers a free rental property assessment to investors looking for their first investment property. To take advantage of this free service, feel free to contact us online or call us by phone at 254-401-0400.
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