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 it is 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. 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 must know how to spot a good deal on a property. It’s a crucial skill to master. However, 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. There are websites like BiggerPockets.com that have a wealth of information and resources for new investors, as do 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. It uses a specialized financial skillset as well as lingo that other industries don’t use. To be a successful investor, you’ll need to know these things to make the best deals. Consider this 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 done so yet, create a business plan that will help you articulate the big picture and navigate through any obstacle. 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. While the risks in real estate investing are different from other types of investments, Murphy’s law still holds true— things can and will go wrong sometimes. Luckily, 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. This is a smart move because 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 the investors more averse to risk, less expensive rentals in stable neighborhoods might be the better option. The profits may be a bit smaller but it would be a surer bet.
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. And so, one of the keys to investing success is being able to bring a great team together. This means finding honest people who you respect and who understands your communication style. 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?
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 Ventura County, 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. And that is why Real Property Management Ventura County 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 805-387-3682.
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