Real estate investing is a challenging business. Advertising claims and get-rich-quick schemes may have led you to believe that investing in real estate is very easy and you could get your money back right away. The truth is, it 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 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 it’s your goal to be an investor, then you’ll need to have an excellent grasp of what drives markets, changes to laws and regulations, current trends, and warning signs, 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. The internet offers so much wealth of information and resources for new investors. There are sites like BiggerPockets.com that can get you started. Also available are dozens of how-to books, 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 lingo in the industry that isn’t used anywhere else, and successful investors need it so they can spot 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, 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 overcome any minor problems. It’s also necessary to prepare an exit plan, and it should be done long before it’s needed. 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. Fortunately, you have the opportunity to decide in advance what kind of real estate investor you want to be. By doing so you mitigate the inherent risks. 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 into account 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 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?
The essence of real estate investing is that it 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. So we can say that one of the keys to investing success is being able to assemble a team of people who share or, at least, understand your communication style and with whom you can foster a relationship of integrity and mutual respect. 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?
In the past, real estate investors invest in and then manage their own rental properties, making the vast majority of them owner-landlords. This was back then, but the prevailing strategy has since 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 Executives Greater Atlanta, investors can buy rental properties just about anywhere. You no longer have to be limited. There are nearly 300 quality property management offices nationwide and they are all willing to care for and lease your rental properties no matter where you find those great deals.
Real estate investors that are successful all have the best available information, experts, and tools. And this is the reason why Real Property Management Executives Greater Atlanta 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 678-504-8580.
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