10 things to know before getting into real estate investing.
Getting things going quickly is more important than planning them perfectly. Personal goal? If you want to become something like a film maker, musician or a writer then the only way to get there is begin doing it. You don’t want to wait until you know a lot about how to film or how to play an instrument or write because you’ll never be what you want to be. If you are serious about becoming a real estate investor learning is smart but ultimately you just have to start doing it
What to expect
Expect for real estate investing to take up a lot of time, then double it. There is a lot of things you have to do before you even START looking for a cash-flowing property. Then it’s just a continuation of up-keep of your property. Thank goodness for property managers but this is still your business, you’re the decision maker. Once you get a house it might need renovations or a tune up or a bit of lipstick which ever description you prefer. A lot of things add up! You have to factor in every cost possible from your property management fees, budgeting vacancies for possible tenant turnovers, utilities to garbage pickup and much much more. If you miss something in your cash-flowing calculations the property might not cash-flow once you buy it and find costs you might have forgot about and then it turns out your losing money. So your cash-flowing calculations are super important! Once again you don’t have to have it all figured out before you start your real estate business. Several things you will learn just by doing wrong unfortunately! I suggest getting a mentor to help you along the way that has experience to tell you what things to avoid to mitigate your risks or to answer and of your questions to guide you through your business.
#1 – You’re Creating a business (Treat it like a business).
Good old dress code. Your tenants will respect you more if you show up in jeans and a nice shirt maybe a suit if that’s your style and act professional rather than show up in sweat pants and a stained t-shirt and talk to them as if they were your buddies or gals. Own your positions and take them seriously.
Your property is the business and the tenant is the client.
#2 – What is your plan with real estate investing?
Start with the end in mind. Is it your retirement plan? Your children’s education? To give you more free time? Or an exit strategy from your current job? You need to know what real estate is going to do for you. Three great deals will do more for you than eight bad ones. Numbers aren’t the most important consideration as a real estate investor – despite what most investors will tell you.
What’s important is whether each deal you do moves you closer or further away from the life you want to live. Make sure you’re setting goals for yourself, based on what you are trying to create for you and your family. Even though an experienced investor who says they have 100 rental properties might sound impressive, but are they actually all successful cash-flowing properties and suitable for the life they want to live?
The only way you can fail is if you give up. Real estate investing requires the action takers! There are several things to do that are required to get your first property.
#3 – It takes up a lot of your time.
Expect real estate investing to take up a lot of time, then double it.
To be successful you’re going to need to get familiar with your market. Being on the computer and your phone just tripled. Not only will you have to do a ton of research but also getting out there viewing houses and their neighbourhoods. You will have to meet with people like your relator, mortgage broker, contractors and more! Everything from here is ongoing and consistent. Once you own a property it will need to be maintained, there will be office work, and managing great tenants. This is a business and you’re going to have to put in a lot of effort and a lot of TIME to keep moving forward to reach your goals.
#4 – You don’t need to be an expert at it.
This is one of the great things about real estate investing. Anyone can do it if they are willing to take the action. Finding a mentor is the best advice I can give you while you start to create your portfolio. Your first few deals are the most critical to your business. It’s important you do it right the first time because it can either make or break you. You don’t want to be feeding money into your first deal because you didn’t get your numbers right the first time. Down the road that’s going to be a problem and may hurt the rest of your investments. Although there is always self-educating, you can only get so far on your own. Take your education seriously.
#5 – Be organized from the start!
Book keeping is important and you will have a lot of it owning your own business. Start a file system! Even if you only have one property. It’s better to be organized from the start because many people can tell you… paper work can get out of hand and fast if left unattended. It’s like your clothes… If you never hang anything up eventually you’re going to have a huge mess.
#6 – Don’t quit your day job.
Most people will tell you to not quit your day job! And it’s for a reason. You’re not going to live entirely off your first investment and it will take time to do so. If you quit your job and become self-employed it takes 2-3 years of solid income to qualify for a mortgage. So how are you going to make a full time income off of one property? You can’t.
#7 - What do you bring to the table?
Maybe you’re terrible at dealing with people. That’s when you hire a property manager instead of getting that extra income by being your own property manager. Maybe your previous job was in construction so your renovations are easy breezy and you can save a lot of time any money because you know what you’re doing. Figure out what skills you have or something you enjoy doing about the business and do that!! Don’t force yourself to do certain things if you’re not getting it or don’t like doing!
Consider what might be more beneficial to your business if you hire someone else to do something for you. At the start it might not be in the budget to hire a bunch of extra people to do certain jobs, but doing it yourself the first time will give you a better understanding of how things work, how long something actually takes, or what things are needed. You will learn a lot more if you do it yourself and try to understand everything before you hand over the reins to someone else. You can always gain new skills! Go to workshops, take online courses, join groups, and read books! Finding a mentor and investing in yourself for your business could save you TONS! Us investors didn’t end up here by accident!
#8 – You won’t be a millionaire overnight.
At first you might really feel the struggle of having nothing. And that’s normal. You’re putting your blood sweat and tears into your properties and it feels you’re not anything in return. Buy and hold investments is a long term wealth solution, and as the tenants pay down the mortgage you are building equity. So over time as you get more and more properties and your tenants continue to pay down the mortgages, every month you’re a step closer to wealth. That’s why most people make the end goal their retirement plan.
It’s also important to have higher cash-flows on your properties because you can save that money every month as income as well. Although, its better to hold onto that cash in case the unthinkable happens. You want to make sure you have funds for repairs and maintenance and more.
#9 – Who you surround yourself with matters.
If you have a crazy uncle who lost everything and hates real estate investing, don’t listen to him. Surround yourself with people who have done it before and are successful at it. There are many events or groups you can join or follow to network and ask questions. The people you surround yourself with will impact your business greatly! People that are willing to help and support your goals.
#10 - Trust Your Math!
You just calculated all the expenses and wow its cutting it close... but you love this house so much. It has the perfect layout, it’s in a great location, and it doesn’t need much work. Couch….. well look at your numbers… Cutting it close is not going to do it. Don’t get mentally attached to your investment properties!! Trust your numbers that it just will not work for you and your business and move on. There will always be the “deal of the century” just around the corner. Be patient.
- Karysa Brossoit.