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. However, it is a time-tested pathway to wealth. It is 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. So, before jumping in, answer these six important questions and then you can better see how you should approach the industry.
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 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. 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. Suppose someone wants to get into investing in rental properties. 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 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 necessary to prepare an exit plan, and it should be done long before it’s needed. The truth is, real estate investing isn’t just about finding great deals and buying in; it’s also about knowing the proper way and timing to get out.
4. How comfortable are you with risk?
All investments carry some degree of risk. It’s no different 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. 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. A lot of rental property owners develops 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 investors that are more averse to risk and want to go the safer route, less expensive rentals in stable neighborhoods might be the better option.
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. As a real estate investor, you’ll be spending so much time 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. When you observe successful real estate investors, you can see that they leverage their trust in other people to help them do a lot more in less time. This enables them to complete the many tasks that real estate investing requires, and complete them quickly. 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. 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 Greater Milwaukee, investors can buy rental properties just about anywhere. You are now free to go wherever the deals are best since there are nearly 300 quality property management offices nationwide. All these offices are ready to serve you— to care for and lease your rental properties.
To be a successful real estate investor, you need to have the best available information, experts, and tools. And that is why Real Property Management Greater Milwaukee offers a free rental property assessment to investors looking for their first investment property. To get this free service, don’t hesitate to contact us online or ring us at 262-309-6961.
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