Real estate investing is a challenging business. You may be under the impression that investing in real estate is quite effortless and the profits come right away. This notion usually comes from advertising claims and get-rich-quick schemes. The truth is, investing in real estate 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. For this reason, you need to ask yourself these six important questions before embarking on the journey of real estate investment.
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 you plan to be an investor, you’ll need an excellent grasp of what drives markets, changes to laws and regulations, current trends, and warning signs to heed, 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. 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. Take as an illustration that someone wants to start investing in a rental property. 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 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 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. Also, an exit plan is essential, and you should be prepared with one long before you need it. 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 no different with 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. 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 a higher reward investment and don’t mind the high risk that goes with it, 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?
Real estate investing is essentially 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. Therefore, one of the keys to investing success is assembling a great team. This involves finding people who understand how you communicate and who have a relationship with you that is built on honesty and respect. If you notice real estate investors who are successful, you can observe them leveraging their trust in other people to help them complete the many tasks that real estate investing requires. By doing this they accomplish so much with so little time spent. 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?
Traditionally, the vast majority of real estate investors were owner-landlords. These were people who invested in and then managed their own rental properties. That was the past, however, and times have 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 Investment Solutions, 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. For this reason, Real Property Management Investment Solutions offers a free rental property assessment to investors looking for their first investment property. To receive this valuable free service, contact us or call us at 616-419-8880.
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