Real estate investing is a challenging business. Advertising claims and get-rich-quick schemes may have led you to believe that investing in real estate is very easy and you could get your money back right away. The truth is, it 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 is why, before you go onboard, you need to ask yourself these six important questions.
1. How much do you know about the real estate industry, market, terminology, and so on?
You must know how to spot a good deal on a property. It’s a crucial skill to master. However, 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 your knowledge about real estate investing is lacking, then it’s a good idea to learn all you can about it first. When you have a good handle on it, you can then start your journey by buying your first rental property. The internet offers a wealth of information and resources for new investors. There are sites like BiggerPockets.com that can get you started. Also available are dozens of how-to books, 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. It uses a specialized financial skillset as well as lingo that other industries don’t use. To be a successful investor, you’ll need to know these things to make the best deals. To illustrate, let’s say someone wants to begin investing in rental properties. They 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 real estate financing isn’t part of your knowledge base yet, then consider educating yourself first.
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 just like all other 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 drafted a business plan yet, create one that will help you articulate the big picture and solve any minor issues. It’s also vital to have an exit plan before you actually need one. Real estate investing, as it is with all investing, isn’t just about getting in; it’s also about knowing when and how to get out— and getting out on top.
4. How comfortable are you with risk?
All investments carry some degree of risk. That risk is also present in real estate. Although the risks in real estate investing are different from other types of investments, there will still be some issues you’ll need to address. Thankfully, there are opportunities to mitigate the inherent risks by deciding in advance what kind of real estate investor you want to be. There are a lot of rental property owners who develop a niche, purchasing similar properties. It’s a pretty good strategy considering that their experience gives them a deep understanding of one particular kind of investment property. If you want to go for something with a higher risk (but with a higher reward), then you may want to gamble a bit more on higher-priced properties, or those in high-rent areas. For those who are conservative and more averse to risk, 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 essence of real estate investing is that it 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. Real estate investors that know what they are doing leverage their trust in other people to help them complete the many tasks that real estate investing requires. This allows them to achieve more in less 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. This is mostly due to the fact that this approach tends to limit your investing potential to a small geographical area. It has to be in a location near to where you live. Using today’s real estate platforms and with the rise of national property management companies such as Real Property Management Results, investors can buy rental properties just about anywhere. You are now free to go wherever the deals are best since there are nearly 300 quality property management offices nationwide. All these offices are ready to serve you— to care for and lease your rental properties.
The best real estate investors need to have the best information, experts, and tools available. And that is why Real Property Management Results offers a free rental property assessment to investors looking for their first investment property. To get this free service, feel free to contact us online or call us at 812-461-1676.
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