Real estate investing is a challenging business. Contrary to what you may have heard from advertising claims and get-rich-quick schemes, investing in real estate 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. 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?
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. 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 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. There are sites with a wealth of information and resources for new investors— sites like BiggerPokets.com. There are also 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. There is a financial skillset and lingo being used in the industry that sets it apart from other industries, and successful investors need this so they can get 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 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 vital to have an exit plan before you actually need one. This is because real estate investing is not just about getting in; you need to think about how to get out at some point as well.
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, it’s quite rare to have zero obstacles. There will always be something that goes wrong— sometimes it’s a minor issue but sometimes it’s huge. Luckily, 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. It’s a good move especially if you think about how 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?
At its core, real estate investing 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 that one of the keys to investing success is the ability to form a team of people who you can communicate with and with whom you can develop a relationship of honesty and 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?
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. 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 California Coast, investors can buy rental properties just about anywhere. You can now go anywhere in the country looking for the best deals as there are nearly 300 quality property management offices nationwide. All these offices are ready to care for and lease your rental properties no matter where you find them.
In Conclusion
To achieve success as a real estate investor, you’ll need access to the best available information, experts, and tools. Which is why Real Property Management California Coast 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 310-535-2150.
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