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. However, it is a time-tested pathway to wealth. It is 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. 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 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. There are websites like BiggerPockets.com that have a wealth of information and resources for new investors, as do dozens of how-to books, articles, and videos out there.
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. Case in point, someone investing in rental properties needs 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 like almost any other business, 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 written a business plan yet, create one that will help you articulate the big picture and iron out any wrinkles you may encounter. 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. It’s the same thing with real estate. Although the risks in real estate investing are different from other types of investments, things can still go wrong sometimes. Luckily, 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. 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 the people who are more averse to risk and would prefer surer profits that may be a bit smaller, 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, you’ll be spending so much time with a large team of real estate, mortgage, and home remodeling professionals. 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. 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 Gold, 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.
To achieve success as a real estate investor, you’ll need access to the best available information, experts, and tools. And that is why Real Property Management Gold offers a free rental property assessment to investors looking for their first investment property. To avail of this valuable free service, contact us or call us at 301-392-2172.
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