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. However, it is has been shown beyond doubt that it is a 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. 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?
You have to know how to spot a good deal on a property. It’s an important skill. 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 are a specific financial skillset and a certain lingo that is used in the industry, and successful investors need to master it to be able to make great 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 is a bit lacking, do consider adding to your education.
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. Also, an exit plan is essential, and you should be prepared with one long before you need it. 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. Although the risks in real estate investing are different from other types of investments, things can still go wrong sometimes. Thankfully, 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. This is a good idea since 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 nature of real estate investing is that it really is a business that relies on relationships with other people. As a real estate investor, you’ll be teaming up with a large team of real estate, mortgage, and home remodeling professionals. So we can say that one of the keys to investing success is being able to assemble a team of people who share or, at least, understand your communication style and with whom you can foster a relationship of integrity and mutual respect. 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?
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 East San Gabriel Valley, 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.
Success for real estate investors involves having the best information, experts, and tools available for their use. Because of this, Real Property Management East San Gabriel Valley 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 626-600-2884.
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