While leaving behind your nine-to-five to start a career in real estate isn’t for the faint of heart, it does encompass the end-goal we all very much desire: financial freedom. For those looking to start a career in real estate, it’s crucial to answer a few significant questions before replacing the cubicle with the real estate office.
How To Start A Career In Real Estate: 4 Questions To Ask Yourself
The following outlines four questions everyone should ask themselves before delving into their first real estate investment opportunity:
1. What is your purpose?
Before switching professions, the first question you need to ask yourself is “why.” Why do you want to get started in real estate and what is your purpose for doing so? Whether to achieve financial freedom or live life on your own terms, this is a critical question for would-be investors to consider. The first step to investing in real estate for beginners is uncovering your purpose and establishing your goals. Below represents several reasons why many choose the path of becoming a real estate investor:
- Freedom to choose your own hours/work for yourself
- Freedom to reach your own goals
- Limitless potential to grow your business
- Cash flow
- Tax benefits
Comprehending what you want out of real estate is the first step; the next is writing it down. Fear continues to suppress a large percentage of those seeking to start a career in real estate. Although a chunk of those submit to this fearfulness, having something to revert back to when things get off track, like your list of goals and aspirations, will help to keep you on the right path. On that same note, the importance of writing a real estate business plan is second to none.
“A well-devised business plan is entirely capable of guiding real estate investors on the path to success and keeping their actions in line with their goals,” says Than Merrill, my colleague at FortuneBuilders.
Because success doesn’t happen without the proper planning and implementation, a real estate business plan will enable investors to continuously visualize the big picture and remain focused on their goals.
2. Where do you stand financially?
Where do you stand financially? This question is important when you start a real estate career because it puts into perspective your goals and how you intend to obtain them. With little-to-no savings, investors will need to consider other financing outlets such as private and hard money lenders. The same goes for those with bad credit scores.
“Credit scores are a crucial component of the homebuying process, impacting everything from the size of a mortgage payment to the interest rate on a home loan,” said Senior Vice President for TransUnion, Ken Chaplin. “People with subprime credit may face financial barriers to homeownership, making it difficult for their dream home to become a reality.”
Understanding your credit score is vital for would-be investors. This three digit number will not only lead to better deals and money saving tactics down the road, but open the door to new funding opportunities along the way. Whether or not you have good credit, bad credit, a large savings/no savings, experience in real estate or none at all, it’s important to grasp where you stand financially before making the switch.
In addition, one of the bigger misconceptions about real estate investing is the prerequisite you need a lot of money to get started. This is simply not true, as there are a slew of different funding options available to you, including traditional lenders, hard money lenders, and private money lenders. That said, it’s important to determine which real estate financing outlet works best for you and your goals.
3. What is your risk tolerance?
Risk is inevitable in real estate investing. In fact, it’s the nature of the beast, as anything that involves investing will entail some degree of risk. However, in real estate, risk is generally tied to the numbers. In almost all cases, the numbers will dictate the financial outcome in a business dealing.
That said, making sense of your risk tolerance is a determining factor in the type of real estate investments you’ll undertake. Wholesaling, prehabbing or rehabbing will all encompass a degree of risk. Looking for greater returns? You’ll need to partake in riskier investments to achieve those results. For those seeking safer bets, bypassing bigger gains for consistency is the way to go.
For example, a rehab — which will include upgrades and additions — will require a significant amount of money upfront. The gamble is whether or not the upgrades will equate to the desired selling price investors are seeking. If not, investors will be unable to recoup their initial investment.
Risk tolerance also plays an important factor when building a real estate portfolio. This collection of various investment assets, which are held and managed to achieve a financial goal, will generally be dependent on an investor’s objective, time horizon and risk tolerance.
4. Are you self-motivated?
Success in real estate investment is not without obstacles and roadblocks. It takes a strong commitment and dedication to not only pursue dreams of real estate gold, but continuing to do so when times get rough. To start a career in real estate, you will undoubtedly need to be self-motivated.
Michael E. Gerber, author of The E-Myth Revisited, writes: “The basic difference between an ordinary man and a warrior is that a warrior takes everything as a challenge while an ordinary man takes everything either as a blessing or a curse.”
The underlying force to becoming a profitable real estate investor is self-motivation. That’s why asking yourself the question shouldn’t be taken lightly. Successful real estate investors are neither predestined or born overnight; they are sculpted through trial and error. Furthermore, the ability to push past mistakes is derived from motivation, including the belief in one’s self. For those that choose to start a career in real estate, you will ultimately become your biggest cheerleader.
As cliche as this question sounds, self-motivation is a fundamental element among successful entrepreneurs. This entrepreneur mindset is essential when looking to start a career in real estate, especially when considering leaving behind the nine to five to do so, as this mindset can be a catalyst for great change in one’s life.
Answering these four questions before you start a career in real estate will not only ensure you’re mentally ready to get started, but also call attention to your goals.