Anyone can be a real estate investor. Not everyone will be successful at it. There is a fine line that separates investors from those who are struggling. In most cases, the steps you take before you enter the business make all the difference. Almost all investors think they are going to hit the ground running as soon as they commit to the business. What they find is that real estate investing is just like any other business: that you need to work at it. If you do not plant the seeds of success before your first deal, you may face a constant uphill battle. Before you dive right in, there are five things that every new investor must do.
1. Educate yourself: If you don’t know what you are getting into, it is difficult to close deals. Investing in real estate can be complex. There are many different types of deals, and each of them structured in a different way. Watching and reading as much about the business as possible is a good start, but far from enough. What you see on TV may not always be in line with reality (no pun intended). If you want to be a success, you need to go to as many workshops and seminars as possible. You need to visit different real estate websites and read as much as you can. You may not use your education right away, but in time it will help you get deals. Not only will education help you find deals, but it will help protect yourself and your business. The greater your education, the more likely your transition into the business will be a smooth one.
2. Know your local market: There are many different places to invest in real estate. You could buy a property 500 miles away just as easily as you can the next town over. With all the news and information available about real estate it is easy to get confused. Instead of basing your information on national data you need to know your local market. Most new investors start out investing in their local market. They want buy where they can see the property and feel they know the area. There is more to knowing the local market than being able to rattle off street names. You need to know which areas are on the rise and which are on the decline. You need to know information on taxes, unemployment, new housing starts and foreclosure data. A lot can change in a town from block to block. The best investors know everything about the area they are investing in. This is especially the case when you are just starting out. Become an expert on your local market and go from there.
3. Develop a niche: Knowing where, when and how to start investing can be overwhelming. Instead of wasting time looking at every potential deal develop a niche. You are not locked into this niche for the long term but it is helpful in the beginning. If you find an area that you enjoy and are comfortable with it will help ease the transition. Most new investors want to follow the blueprint of someone else and invest the exact same way. What works for someone else may not work for you. Your niche can be anything you like. Tax liens, mobile homes, commercial buildings and probate deals can all turn into a successful niche if you are passionate about it. Become an expert on your niche and be ready to talk about it when asked. It is better to be an expert in a field that few investors are in than trying to chase the same foreclosure deals as everyone else. As you start closing a few deals and developing your network your niche may change over time. When you are starting out focus on a niche and make it your own.
4. Know your schedule: The rehab deal you see on TV takes a lot more time than you think. Any deal that you close requires due diligence that is very time consuming. Before you start investing you need to assess how much time you can dedicate to the business. You don’t need to invest full time to be successful but you do need to put the work in. Part time investors may not be able to work on rehab deals or manage rental properties. They can hire people to do the work for them but this will eat away at potential profits. One of the allures of real estate is the fact that you can make your own schedule. While this is the case it doesn’t mean you don’t have to work. Knowing how and when you can work will impact which deals you pursue.
5. Have a goal in mind: Closing deals just for deal sake shouldn’t be your goal. It is important to have clearly defined goals before you begin investing. Your goals will help you decide which deals to entertain and how you will do it. It will also help you stay focused throughout every deal you do. Investors who have goals are more likely to achieve them than those that do not. With your goals attach a plan on how you are going to achieve them. If you hold yourself accountable to this and stick with it you increase your chances of making it a reality.
Starting any new business can be an overwhelming experience. If you focus on these five areas alone, you can ease the transition and increase your chances of success.
