5 Essential Steps To Becoming A Real Estate Investor
By JD Esajian on March 17, 2017
Anyone can become a real estate investor. However, if you want to be successful there are a few things you need to do prior to getting started. Where most new investors get in trouble is diving right into the business without much of a plan. One of the things that makes real estate investing unique is that it is one of the few professions you can enter without any formal education. There are no licenses or certificates needed to make an offer on your first property. While this can be a blessing it can also be a curse at times as well. Like any other business there are a few things you should get in line before getting too far. Doing these can often make the difference between success and disappointment. Here are five essential steps that every new investor should take.
- Know The Business. On one hand, real estate is just like any other business you may have been involved in. On the other, there are a unique set of terms, numbers and processes that make it entirely unique. As you are getting started you need to take the time to know everything about the real estate business. Understand the steps on every deal as well as the best and worst case scenarios. Talk to fellow investors you meet at investment clubs and don’t be afraid to pick their brains and ask them about the business. You should never be caught off guard by something that happens during a transaction. There will always be twists and turns with every deal but you should at least know what to do when they present themselves. It should go without saying but the more you know about the business the better off you will be.
- Know Your Market. A real estate trend in California may not have much of an impact if you invest in New York. It is important not to look at national trends and apply them to your investing. Every real estate investing market is unique. It is critical that you know and understand everything about where you invest. Many investors rely on poor or outdated market information when putting together an offer. This is a surefire way of getting in trouble. If your comparable sales are more than even sixty days old you may be miscalculating the market. Being off by 10% has a trickledown effect on everything else in the transaction. The best way to learn about a market is by looking at sales prices, sales trends and current demographics. You may have never previously thought about items like property taxes, crime rates and quality of schools but you better get used to them if you want to be a real estate investor. Only when you fully understand the market are you ready to make an offer.
- Start Networking. Real estate investing is largely based on your personal network. With the recent influx of investors you need to find alternative ways of generating deals. It is not enough to wait for your real estate agent to email you new listings. You need to be proactive in finding deals and meeting people. What you will find is that the size of you network has an impact on the number of deals you will work on. If you want to jumpstart your business you need to let everyone know that you are in real estate. Start by sending everyone you know an email telling them about your new endeavor. From there make a point to attend as many networking groups and investing clubs as possible. Find a few groups through your social media sites and constantly look for ways of branching out. Every day you should do something that will increase your networking profile and help you find deals.
- Understand Numbers/Finances. Investing in real estate is all about the numbers. It is not enough to buy a property, put some work in and sell for a higher amount. There are carrying costs, closing costs and other fees that must be factored in along the way. Not understanding the numbers can make a great deal turn average very quickly. It is also important that you understand how to handle your business finances. Getting a check at closing does not mean you can have a party or take a vacation. There are often debts that you accumulated along the way that must be paid as well as expenses needed to be made to grow your business. Understanding every finance term and definition can be overwhelming but it is an important part of your success. There are numbers everywhere in real estate and it is critical that you understand them.
- Run It Like A Business. If you are going to treat your investing like a business than you need to run it like one. This means coming up with systems and processes to track your lead generation, expenses, networking and revenue. If you do not know where your money is going or your leads are coming from you will eventually have trouble in your business. Running a business doesn’t mean you need to spend 40 hours a week. Even if you only want to buy one deal every six months you still need to focus on solid business principles. The more you run your real estate business like a business the more successful it will be.
Becoming a successful investor is very much a process. It is very rare to have immediate and overnight success. Use these five steps to help get your business started.