Is there a way to navigate real estate that will 100% solidify your success as a real estate investor? A popular question is why some real estate investors do exceedingly well, while others remain broke, without any listings or investments. Does it have to do with race? How much money you’ve got (or not got) to invest? Your background? This truly is a common topic.
Does it have to do with your personality? Your business experience? There actually is a very easy formula that has a full success rate, if implemented (and correctly). This ensures your success in real estate investing. Real estate investing can seem like an easy way to make some money, after all, plenty of people have found it to be very financially rewarding. The thing is, people who find success with it typically do their homework to minimise risks. Here’s how to do it:
The right education and mentor
You’ve got to have a great mentor if you want to be successful in real estate investing. You’ve also got to have (the right) education. By themselves, books, courses, and online videos aren’t going to give you the right education to be successful. Note that we said the “right” education. An education, and a “right” education are two totally different things. You can educate yourself until the cows come home, but if you’re absorbing incorrect information, you’ll actually hurt yourself more than help. A mentor helps you gain experience.
You can read and watch all you want, but it is the experience that educates you. Plus, most reading on real estate ends up in the reader being confused. Real estate is complicated, there’s no doubt about that. To get the right education, you need the right mentor; no way around it.
A total desire to succeed
It doesn’t matter who you get to mentor you if you don’t have the drive to do well. You could have Warren Buffett mentoring you on money, and you’d still be broke if you didn’t have the burning desire to really learn from him and follow his advice. If you don’t have the inner, burning desire to succeed in real estate, you really shouldn’t bother. You’ll lose hope or interest at the first challenge you encounter. Failing in real estate must not be an option, because you will fail. Those that don’t have the burning desire will quit when a problem arises, and say that real estate just wasn’t for them.
This one isn’t too difficult. You’ve got to stick to it! Don’t quit when a challenge arises. You’ve simply got to keep pushing until you succeed. In order to keep pushing, you’ve got to be persistent. Too many investors give up just before they’re onto making serious money. Real estate is not a “get rich quick” scheme like people like to advertise and talk about.
You probably won’t get and close your first deal until the first few months, at the earliest. You will not become a millionaire over night. According to data, real estate is the best small business in the United States. People who get discouraged in real estate start to feel “the grass is greener,” and then they quit. If you have the right education, a total desire to succeed, be persistent, and have the right mentor, it’s almost impossible to fail.
More ways to succeed in real estate investing:
But real estate investing doesn’t have to be difficult or scary. What you want to do, is maximize return while minimizing the risks. That’s your goal. When done correctly, real estate investing is one of the safest and best long-term wealth-building tools in the world. With that in mind, here are some tips to help you successfully launch your real estate investing career.
Before you buy that first property, or do your first analysis, determine what you expect from your investments. What are your financial goals? Consider the “time vs. money” concept: The more you have of one, the less you need of the other to reach your financial goals. This means that you shouldn’t shy away from taking the time to understand your goals and make sure each investment is a step toward achieving them. If you are unsure exactly how to create financial goals, meeting with a financial advisor is an excellent first step.
Don’t waste your time at seminars, or money on books
Don’t wipe out your savings paying for books or seminars. You absolutely do need to learn some basics before venturing into investing. So, be sure to do some studying, but don’t let “buying and collecting” information become your endgame. Again, having goals in mind will make the process much more straightforward. It’s easy to get so tied up in the “research” phase that you never actually take action. Instead, write down specific questions you want answered or goals you want to meet before delving into the latest book/seminar/etc.
Also don’t just grab the first property you look at. Too many investors buy properties because they “look nice,” or the investors don’t want to put the work in to look at what’s really out there. Remember, you won’t be living there, so don’t make your investment decision based on your personal preferences. While you shouldn’t fall into the trap of analysis paralysis, make sure you are thorough in looking through properties. Give yourself a wide range of options, then narrow them down based on the criteria (goals) you have set for yourself.
More about real estate investing success:
1. Real estate investing is a business, and you should treat it as such. Start by developing a good business plan, detailing the nuances of starting and running your business, with realistic goals over time frames of one, three, five and 10 years. If you don’t know how to write a business plan, you can find help at the Small Business Administration’s website.
2. Check your credit report to determine your ability to finance investment property. Most lenders today require 700 or better FICO (Fair Issac Co.) scores from borrowers who want to buy investment property. Also, make sure that your total debt-to-monthly-income ratio is low. Often it makes sense to pay down outstanding credit card debt or car loans in order to improve your debt ratios. You’re entitled to one free credit report per year from the three major credit bureaus (Trans Union, Equifax, and Experian), but they’ll only provide your history, and not your score. Instead, try Credit Karma to get both.
3. Find a good bank or mortgage broker in your area if you’re financing your investments. Realtors (real estate agents who belong to the National Association of Realtors and must adhere to a code of ethics) are good sources for recommendations, or you can ask other investors whom they’ve used. You might want to do this even before you start your property search. If you’re paying cash, you’ll need to prove you have the funds by submitting a recent bank or brokerage statement when you make an offer.
4. Determine the best areas to look for properties. Some new investors make the mistake of limiting their search to areas close to their home. But often better rental areas may be located a little further away. New investors may think they need to live near their properties in case tenants call about repairs or other problems. But in reality, if the home is put into good repair before your tenants move in, those calls from tenants should be few and far between.
5. Talk with other investors about local real estate. Join a real estate club in your area (do a quick Google search to find them). Real estate clubs are great places to network with other investors, lenders, and repair service providers. You can often pick up helpful advice about your local market from other club members. Some communities offer courses on real estate investing through adult education or local real estate brokerages.
6. Consider multiple sources for buying properties. New investors may think they can only purchase homes through their local Multiple Listing Service (MLS), or by banging on doors in run-down neighborhoods looking for distressed sellers. But sometimes you can find much better deals on real estate auction sites, such as Auction.com, and these sites make it possible for buyers to easily make purchases in locations beyond their immediate area.
Be prepared to start using your brain
If you’re just beginning to invest in real estate, you’ll find that there’s a lot to learn. Real estate investing is more complicated than investing in stocks because of the financial, legal, and extensive due diligence requirements involved. That’s why it’s a good idea to give yourself a solid education before you purchase your first investment property.
Investing in real estate is just like investing in the stock market in at least one way: you’re looking for the best deal. If you’re a savvy stock market investor, you probably won’t buy too many stocks at their high if you plan on holding them for a long time. Instead, you’ll follow the Warren Buffet principle of getting greedy when everyone else gets fearful. You’ll buy stocks that are beaten down and make a fortune when they turn around.
That’s what you want to do when it comes to real estate investing. Avoid paying “full price” for properties. Instead, look for so-called wholesale properties that are offered at a steep discount. Sure, they’ll probably need some work. Run the numbers and see if the investment in rehab is worth the ultimate selling price. Real estate investing offers the potential for fabulous returns. However, people have also bankrupted themselves investing in real estate. Be sure that you know what’s involved before you start.
To get and close on a great deal, you’ve got to:
Find a Good Real Estate Agent
If you’re investing in rental property, the best real estate agent you can find is someone who is also an area investor. Better if your agent can show you some of their properties together with what they are charging for rent. You can also ask your agent for details such as names of other investors they helped. A good real estate agent will either have a team of real estate professionals such as insurance advisers, home inspectors, lawyers, accountants, property manager, and mortgage brokers; or have refutable contacts that can be shared with you.
Think Long and Hard about Location
Real estate is all about location. An area in decline will be a loss in the future no matter how cheap the property is. If big chains such as Home Depot and Tim Hortons are moving in, then that area is either on the way up or is a prime location because big chains use a lot of research before setting up business in any location.
Draw a Partnership Agreement if Investing with Others
Good relations now can turn sour in the future when money is involved. If a real estate partner passes away, loses a job, or ceases to be a friend, problems can ensue later on. With a partnership agreement, what to do in situations like these are decided early on and will help you avoid an expensive mistake later on.
Invest for the Long Term
When you buy and hold real estate for the long term, you can manage expenses and income easier plus plan to pay the mortgage with the income coming in.
Be Careful Who You Rent Out To
Depending on where your property is, renting out homes to students or certain rooms to other people may need to be done with a permit and certain legal parameters in place such as complying with fire code or procuring a license.
Find a Dependable Property Manager
This would be best if you’ll be renting out quite a few properties (more than 3) because when you have a property manager, you can be a bit more relaxed. Property managers handle repairs and minor problems for your rental properties. They also help find tenants for you. Just note that property managers often get 10% of the monthly rent.
Don’t Rush into Leasing Your Property
Evicting a problem tenant can last months so making sure your potential tenants present no issues is paramount. You may have to ask for references and draft a lease agreement several times before both you and your potential tenant reach an agreement.
Being a landlord isn’t guaranteed easy money. You’ll have to ensure that you’ll still have something left after all bills are paid off and the monthly mortgage has been taken care of. When done properly, investing in rental real estate can be very rewarding and will be free from investing mistakes.