Real estate investing isn’t for the faint of heart. But you knew that.
Let’s dispense with the basic how-to’s and don’t-do’s and get right to the nub of the matter: the things every real estate investor needs to know to be successful in a business that seems to change every month.
If you keep these six things in mind as you get your feet under you, you’ll find that your natural-born grit and sales ability will take you far.
- You Need More Cash to Get Started Than You May Realize
You almost certainly took out a mortgage to buy your first home. That’s fine; real estate financing is not inherently evil. There are pros and cons to using cash and/or financing But be mindful to not over leverage.
- Inexperience Breeds Overconfidence
In this business, rookie mistakes are distressingly easy to make, writes Miami real estate investor Ralph Serrano. One cause of early missteps is overconfidence — new investors’ misplaced beliefs, most mistakes come from what you don’t know.
- Every Market Is Different (Seriously)
“Every market is different” is an all-too-common refrain that you’re no doubt sick of hearing.
However, it’s right on the money. Every real estate market is different, or at least has its own set of characteristics and idiosyncrasies that set it apart from others. This isn’t to say you can’t play in multiple markets at once, just that if you cut your real estate teeth in L.A., you’ll have to deal with a learning curve in Dallas or Miami or D.C.
- Cash Flow Is King
One common manifestation of rookie overconfidence is the belief that the rookie can make the numbers work, even when they clearly don’t. Here’s the thing: if even the most optimistic cash flow projections don’t approach your target returns, the investment isn’t going to work out. Cut your losses and move on.
- A Thorough Property Inspection Will Save You a Lot of Grief
Property inspections aren’t just for retail buyers. Paying for a professional inspection before you roll up your sleeves can save you a lot of grief — even when you buy properties sight-unseen at auction.
- The Wrong Contractor (or Sub) Can Ruin an Otherwise Promising Project
Last, but not least, hire smart. The wrong contractor or subcontractor can set a project back by weeks or months and add thousands to your reno bill — neither of which you can afford. Use vetted contractors with long track records, even if they cost a bit more.
Face Your Fears
Before you buy your first investment property, you need to face your real estate investing fears.
These concerns — worries, terrors, whatever you want to call them — look different for everyone. You know how yours look and feel, even if you don’t want to admit that they’re keeping you up at night. The sooner you take them on — head-on — the sooner you’ll be able to step out into the real estate investing world with confidence and aplomb.
The market won’t wait, after all. Will you?