While investing in real estate can be risky and challenging, when done well and handled smartly, the long-term benefits are numerous. From wholesaling to flipping, there are various ways to profit from being a real estate investor, and the numbers show that it is as popular as ever—individual investors account for 74.4% of rental properties.
While competitive, the key is to always step into the business with knowledge, talent, networking, and a plan of action to come out profitable in the end. In this piece, we’re highlighting the top five need-to-knows all investors should keep in their back pocket. If it feels like we’re regurgitating a lot of the same strategies and reminders, it’s because much of what separates a successful investor from a mediocre one bears repeating:there is no shortcut to financial success.
This is not the time to be spontaneous
Spontaneity might work well in other areas of your life, but there’s no room for it when talking business and money. If Step 1, Part A is making the decision to invest in real estate, then Step 1, Part B is to immediately sit down and create a detailed business plan. Maintaining focus on the big picture goals is important and setting up a plan will help create a budget and timeline, while also steering you away from zeroing in on all the potential setbacks—of which there will undoubtedly be. But a plan not only keeps you organized and on track, it helps lay out the framework for all the elements that could potentially impact your investment over time. It sets the stage for a proactive approach rather than reactive, and that’s the first step to becoming successful.
Know the market
There is a science—or at least a strategy—that goes into the decision making for buying a property. The most important factors to consider include studying the local market and making note of any trends. What are the demographics for things like median income and age? What are the consumers’ spending habits? What are the mortgage rates? What about the unemployment rate?Doing your due diligence and having answers to these questions will not only get you started on the right foot when making a well-informed investment decision, it could also create other potential investment opportunities.
This is also important for investors who will seek out a loan to finance their project. Coming to the table with a clear vision and an informed strategy will most likely result in a favorable outcome.
No risk, no reward
Venturing out on your own to make an income is always risky, and real estate investment isn’t for the risk averse. However, there’s a fine line between understanding the risks and being prepared to handle them vs.jumping in with no effective strategy in place.
Of course, the risks associated with real estate investment don’t stop at the deals themselves. An educated investor will be well-versed on the legal implications involved and will know how to navigate potentially dicey waters. Which leads us to the next point…
Invest in other experts
Being a successful real estate investor means knowing when—and whom—to delegate work to. Investing in an accountant, for example, can free up your time to focus on the business that you know while the accountant focuses on what they know. Tax laws around property investments and rentals can be complicated and not worth handling on your own—the risk for making mistakes is too high.
Creating a strong network of other industry professionals—realtors, contractors, and fellow investors—will not only keep you learning and plugged into the latest industry news but could also open doors to potential clients and other markets. Like any other business, you want to surround yourself with successful peers.
It’s common for investors to generate a large portion of their business through referrals, and this ties into the importance of having a strong network. While it goes without saying that anyone you work with—from tenant to business partner—should be treated with respect, maintaining strong, working relationships can always lead to more clients, which in turn can open the door to yet another pool of contacts to network with.
Build a reputation that has others seeking you out. With strong work output, a successful track record, and a unique portfolio, referrals might feel like they’re generating themselves.
The overarching framework for how to go about investing in real estate doesn’t shift too much across the board, no matter the investment project. Have each of these listed elements in place and you’re well on your way to becoming a well-established investor.
Having the right financing parter is the last piece of the puzzle - contact Temple View and learn how we can help.