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 has been proven again and again that it is a path to wealth and can give you 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 being the case, it is really important that you ask yourself these six important questions before jumping 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 are planning to be an investor, then you’ll need an excellent grasp of what drives markets, changes to laws and regulations, current trends, and warning signs to look out for, among other things. If what you know about rental property isn’t quite complete, it’s a good idea to first learn all you can about it. After you’ve gained the required knowledge, then you can start being a real estate investor by making your first 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. 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. 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 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 just like 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 critical to create an exit plan before you need it. This is because real estate investing is not just about buying properties to get in; you will also need to know how to get out at some point.
4. How comfortable are you with risk?
All investments carry some degree of risk. It’s exactly the same with real estate. 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. 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. A lot of rental property owners develops 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 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 more averse to risk and would rather have a bit smaller but surer profits, 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 rubbing elbows 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. If you observe successful real estate investors, you can see that they leverage their trust in other people to help them complete the many tasks that real estate investing requires. This allows them to accomplish a lot more with the least amount of 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 old generation of real estate investors were owner-landlords. That means that the vast majority of them were property owners who invested in and then managed their own rental properties. This was the practice in the past, now the trend has shifted. The reason is that this approach tends to limit your investing potential. This limits you 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 South Orlando, 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.
To be a successful real estate investor, you need to have the best available information, experts, and tools. Because of this, Real Property Management South Orlando 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 407-982-2000.
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