Real estate investing is a challenging business. You may have heard from advertising claims and get-rich-quick schemes, that investing in real estate is very simple and you could reap the rewards instantly. The truth is, it is neither quick nor easy. However, it is has been shown beyond a 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. 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 vital to be able to spot a good deal on a property, 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 the information you have about real estate investing isn’t complete, it’s a good idea to first learn all you can about the topic. Then you’ll be better equipped when you make your first rental property purchase. 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 specific financial skillset and a certain lingo that is used in the industry, and successful investors need to master it to be able to make great 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 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, 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 made one yet, create a business plan that will help you articulate the big picture and defeat any minor problems. It’s also necessary to prepare an exit plan, and it should be done long before it’s needed. 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. Real estate isn’t exempted. Although the risks in real estate investing are different from other types of investments, there will still be some issues you’ll need to address. 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 number of rental property owners that 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 are fine with high-risk investments, 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 center, real estate investing 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. 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. 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?
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 mainly because this approach tends to limit your investing potential, constraining you to a pretty small geographical area. Using today’s real estate platforms and with the rise of national property management companies such as Real Property Management Raleigh, investors can buy rental properties just about anywhere. It no longer matters where you find the best deals. There are nearly 300 quality property management offices nationwide ready, willing, and able to care for and lease your rental properties.
The best real estate investors need to have the best information, experts, and tools available. Because of this, Real Property Management Raleigh 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 919-481-0008.
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