To quote the wise William Shakespeare, “To invest in real estate, or to not invest in real estate, that is the question. Whether ‘tis nobler in the mind to suffer the slings and arrows of outrageous fortune…”
Wait. That’s not how it goes? Well, in any case suffering outrageous fortune sounds pretty good to us. Granted, we’re taking Shakespeare at face value instead of delving into the context of the language, which our friend William and any Shakespeare experts will just have to deal with!
Still, the question remains. You’re at a crossroads, wondering whether or not to take the leap into a whole new world to answer the calling of investing in real estate. You know that rental properties are one piece of your long-term plan, but something is holding you back. You've identified your WHY, but haven't taken your first steps.
You want to retire comfortably, you want to fund your kids college accounts, you want that beach house, you want to replace your current income; whatever the reason, it’s time to decide. Big decisions can be daunting. Don’t fret — we’ve got a few investment tips to help you start off on the right foot.
Investment Tips for the New Real Estate Investor:
First things first, you have to ask yourself a few questions and more than anything you have to Be Honest. The funny thing about honesty...the easiest person to deceive is ourselves.
How much do I want this?
Investing in real estate is not a casual commitment. Though often called “passive” income, it still requires effort and attention on your part. You need to be able to dedicate time for researching the market, researching your partners and the team you are going to deal with, and taking all of the steps necessary without cutting corners. If you’re married or in a committed relationship of some kind, you need to have the support and understanding of your significant other. You need to decide if being a real estate investor is worth it to you, both in the ups and the downs. Chances are, there will be both. If you are working with a team in an out-of-town market and they only paint a rosy picture for you with all ups and no downs...you may want to find another team. When you have full confidence in your team then your desire and commitment to get started will go up.
Can I afford to invest in real estate?Before you start, check your finances. That means assets, income, and evaluating your expenses. You might not think you can afford to invest, but you may be surprised. You’re going to be starting small anyway (because overextending is bad)! Remember to budget. Budget before you get started and continue to budget for new front-end expenses and for when properties pay off. Keeping a budget isn’t fun or exciting, but it means you won’t get any nasty surprises down the line. If you deal with a company like ours, the best thing you can do when budgeting is listen. Be inquisitive and ask questions and then listen to the answers. Take good notes and have full confidence that you have the budget answers that you need to keep the finances in order.
Do I have clear goals?
If you don’t, get some. Write them down. Reflect on them often. Real estate investment is not an overnight success style of business, but you should have both short term goals and long term goals. You could start with a broad 10-year plan and break it down — even to weeks — if you want. Figure out what you consider success and why you’re investing in real estate. Breaking down your goals will keep the panic attacks away.
Once you’ve asked yourself these questions, it’s time to take some real, non-introspective steps.
- Start networking
- Find other investors, especially seasoned ones, and learn from them. Keep up with market information and use your connections to your advantage.
- Find your team
- If a turn-key passive investment is not the right route for you as an investor, get to building your team. Investment companies, lawyers, accountants, realtors, title companies...investing is not a one-man show. Research and pick people who know the real estate game and are trustworthy.
- Research and pick smart
- You want properties with wide appeal and low maintenance. You might like the swimming pool, but save it for your own home.
- Don’t give up
- Like anything (and especially things that fiddle with your finances,) it’s easy to get overwhelmed or anxious. But keeping your goals in mind, being realistic, and having a support network of encouraging and savvy folks in the same business is going to go a long, long way.
You may not have Hamlet’s outrageous fortune, (We hope you don’t, really. It was a tragedy, after all.) but we know you can meet that 10-year real estate investment plan.
What’s the biggest challenge you face(d) when deciding to invest in real estate? Tell us in the comments.