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. This is why, before you go onboard, you need to ask yourself these six important questions.
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. 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 being used in the industry that sets it apart from other industries, and successful investors need this so they can get the best deals. Consider the 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 you haven’t mastered the terms and ideas in real estate financing yet, do think about expanding your education. It will really be a great help.
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 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. Ultimately, real estate investing isn’t just about getting in; it’s also about knowing how and when to get out.
4. How comfortable are you with risk?
All investments carry some degree of risk. Real estate isn’t exempted. While the risks in real estate investing are different from other types of investments, there will still be a few wrinkles in your plans. It’s not immune to Murphy’s law— something can and will go wrong. Thank goodness that there are opportunities to mitigate the inherent risks when you decide in advance what kind of real estate investor you want to be. There are a number of rental property owners that develop a niche, purchasing similar properties. It’s a pretty smart strategy especially if you take to account that their experience gives them a deep understanding of one particular kind of investment property. If you can tolerate high risk for that huge 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 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. It follows then that finding people who understand your communication style and forming a team built on integrity and respect with them is one of the keys to investing success. Real estate investors that know what they are doing leverage their trust in other people to help them complete the many tasks that real estate investing requires. This allows them to achieve more in less time. 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 previous 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 Eclipse, 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.
The best real estate investors need to have the best information, experts, and tools available. Which is why Real Property Management Eclipse 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 425-209-0252.
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