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. However, it has been proven again and again that it is a path to wealth and can give you 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. Because of this, there six important questions you should ask yourself before you jump in.
1. How much do you know about the real estate industry, market, terminology, and so on?
It’s essential to know how to spot a good deal on a property, but successful real estate investing required 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 rental property isn’t quite complete, it’s a good idea to first learn all you can about it. After you’ve gained the required knowledge, then you can start being a real estate investor by making 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 are a specific financial skillset and lingo in the industry that isn’t used anywhere else, and successful investors need it so they can spot the great deals. For instance, someone investing in rental property would need the skill to pick apart the details of the deal being offered. 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 what you know about real estate financing is either really basic or obsolete, then think about updating and learning more about it.
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 created one already, draft a business plan that will help you articulate the big picture and resolve any minor setbacks. It’s also critical to create an exit plan 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 exactly the same 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. It’s a good thing that 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 a high risk and reward are more your thing, 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?
At its core, real estate investing is a business that relies on relationships with other people. As a real estate investor, you’ll be rubbing elbows with a large team of real estate, mortgage, and home remodeling professionals. 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. Real estate investors worth their salt leverage their trust in other people to help them complete the many tasks that real estate investing requires. This enables them to spend less time and achieve more. 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 reason is that this approach tends to limit your investing potential. This limits you to a small geographical area. Using today’s real estate platforms and with the rise of national property management companies such as Real Property Management East Cobb, 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.
Real estate investors that are successful all have the best available information, experts, and tools. And this is the reason why Real Property Management East Cobb offers a free rental property assessment to investors looking for their first investment property. To take advantage of this free service, feel free to contact us online or call us by phone at 770-622-5657.
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