5 Tips For The Part-Time Investor
By JD Esajian on July 22, 2016
The real estate business is open to anyone that wants to be a part of it. For every millionaire investor there are dozens more who buy just one property a year. These investors who dabble in real estate comprise a large part of the business. If you fall into this category it is vital that you are disciplined and really know what you are getting into. With only a few deals a year your margin for error is much slimmer. Just one bad deal can set you and your business back tremendously. There is nothing wrong with investing on a part time basis but you need to have a plan of attack. Here are five tips for any part time investor.
- Talk To Fellow Investors. Nothing replaces real world experience. With only a handful of deals most part time investors are lacking in this area. The best way to supplement this is by talking to as many investors as possible. You can start by joining your local real estate investment (REIA) club. Most states hold monthly meetings consisting of attorneys, mortgage brokers, hard money lenders and fellow investors. Even if you haven’t closed a deal in months you shouldn’t be intimidated. The odds are there are several investors who you are in your same situation. Simply by talking to fellow investors you can learn which markets to stay away from and different ways to structure deals. You will slowly develop your personal network that eventually may lead to a deal. You can read all the books, blogs, articles and other information you can find about the business but you will learn more by talking to fellow investors in your area.
- Invest In Local Markets. One of the great things about real estate investing is that you are not bound to any particular region. There is nothing stopping an investor in Connecticut from purchasing a property in Iowa. As flexible as the business is part time investors should stick to their local market. The main reason for this is that wherever you invest you need to know everything about it. You need to study demographics, trends, price changes, new housing starts and much more. You should drive by new listings and get an idea of what value you can assign to certain properties. You don’t have to be an expert investor to know that a lot can change within a market in the matter of just a few miles. The more you know your market the easier it is to make quick decisions if a new listing comes your way. Instead of speculating about value and demand you will already have a good feel on where it is headed. Only when you master local markets should explore branching out into other locations.
- Consider Building A Team. There are many reasons why you may only close a deal or two a year. Often times you don’t have the time to look for deals or manage properties while focusing on your primary occupation. As crazy as it may sound these are the times you should consider bringing on some help. An assistant can help generate leads and put your marketing plans into motion. A property manager will take care of things with your rental property so you don’t have to deal with everything. Sure, these options will either cost you money or eat away at your bottom line but both are essential for business growth. The reality is that an assistant for just a few hours a week will not break the bank. Instead of a few nice lunches or dinners you can afford to hire an assistant. An occasional deal may fall on your lap but if you want to build your pipeline you should consider building your team.
- Practice Patience. One the ways that part time investors get in trouble is by not staying patient. There is a natural tendency to step outside of your comfort zone when you haven’t closed a deal in a while. This is the worst thing you can do. When you only close a few deals a year you need to search for quality over quantity. This doesn’t mean that ever deal will be a home run but you can’t afford to speculate on risky deals. Every few months you should evaluate your business and write down your goals and aspirations. You should make a plan for when, where, how and why you want to invest. Your answers should be your guide for purchasing deals. The more disciplined you are in this aspect the greater chance that you will end up with deals you really like. Staying patient isn’t always easy but it is an essential part of the business.
- Be Ready To Act. You never know when a good deal is going to come your way. Often times deals go to those investors who are the most prepared. It is important that you stay ready at all times. This means updating your proof of funds or pre-qualification letter every 30 days. It means having any loan documents needed on file and knowing what you want out of the purchase. You may only have a small window to make an offer and close. You should always be looking and be ready to act when a new deal comes your way.
Investing on a part time basis is a great way to supplement your income or follow something you are passionate about. Follow these five tips to get the most out of your part time investing.