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. But it is a proven way into wealth and 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. For this reason, you need to ask yourself these six important questions before embarking on the journey of real estate investment.
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 what you know isn’t complete, it’s a good idea to first learn all you can about real estate investing. After getting a good grasp of these things, you can then plunge in and purchase your first rental property. The internet has a wealth of information and resources for new investors. There are websites like BiggerPockets.com that can really help. There are also dozens of how-to books, articles, and videos available for anyone who wants to learn.
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 used that is different from other industries, and successful investors need to know it to be able to make good deals. Case in point, someone investing in rental properties needs 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 think your knowledge of real estate financing isn’t complete, then it would greatly help if you learn more.
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 all businesses do, 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. Also, an exit plan is essential, and you should be prepared with one long 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 the same thing 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. Thankfully, 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. This is a good idea since their experience gives them a deep understanding of one particular kind of investment property. If 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?
At its center, real estate investing is 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. If you notice real estate investors who are successful, you can observe them leveraging their trust in other people to help them complete the many tasks that real estate investing requires. By doing this they accomplish so much with so little time spent. 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. That’s because this approach tends to limit your investing potential. What happens is that you get restricted 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 Baton Rouge, investors can buy rental properties just about anywhere. You no longer have to limit yourself and are free to chase the best deals where ever they show up. There are nearly 300 quality property management offices nationwide that are ready to take care of and lease your rental properties.
Success for real estate investors involves having the best information, experts, and tools available for their use. For this reason, Real Property Management Baton Rouge offers a free rental property assessment to investors looking for their first investment property. To avail of this valuable free service, contact us or call us at 225-389-6860.
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