Are You Ready To Start Investing?
By Paul Esajian on September 18, 2017
Are you tired of watching your friends, family or co-workers make money in real estate while you wait on the sidelines? Do you have an interest in real estate but aren’t exactly sure how to get started? Do you watch countless investing shows wondering how you can be a part of the business? If you have put off your investing career the time to get started is now.
There is truly no perfect time to pursue your first deal and start building your portfolio. While investing in real estate certainly isn’t easy it is not nearly as difficult as you may think. With the right work ethic, willingness to learn and passion for the business you can find and close your next deal in a matter of just a few months. As you contemplate your plan of attack here are five items to consider while you work for your first deal.
- Money. You don’t need surplus capital to start investing. Having extra capital is a nice luxury to have but not a necessity. Regardless of how much or how little money you have it needs to be a consideration as you are just getting started. Your available capital will dictate how you will finance your offers and even the type of properties you pursue. With limited capital you will have to find a hard money lender that will work with you. On the surface this can be intimidating but there are more hard money lenders than ever before. Most of them lend on the specific property rather than the individual credit profile. You may have to start small or take a smaller piece of the profit pie but a hard money lender will help you start making offers and closing deals. Everything in the real estate business trickles down from your available capital and how you finance your offers. A lack of funds is a hurdle and not a roadblock.
- Time. One of the things that makes real estate investing so great is that you can do it on your own schedule. You can close as many or as few deals as you are interested in. If you want to keep your full-time job and invest on the side you have that ability. If you want to commit 50 hours a week to growing your portfolio you can do that as well. Regardless of how you invest you need to assess the amount of time you can dedicate to the business. Working full time may limit the amount of properties you can see during the week. The reduces the number of offers you will make and ultimately the number of deals you close. It also impacts the type of properties you will make offers on. Buying a rental property would mean you would need a property manager which would impact the numbers on the deal. The same is the case with a rehab project. If you work full time you would need a contractor to handle the project and may not be available to handle any issues. You can invest with whatever time you have available but you need know what you are working with.
- Goals. What are you looking for from the business? It is not enough to simply say that you want to make money or close deals. You need to get specific with the kinds of transactions you are interested in pursuing. The strategy for a buy and hold property isn’t the same as a short-term fix and flip. Do you want to close one deal a year or do you want to buy one a month? Do you want to work with a partner or are you comfortable working on your own? How you answer these questions, and more, will shape your actions. Your goals should drive the types of markets you look in, the price points, the condition and even how you structure your offer. Without a clear set of goals driving you it is easy to bounce around the business without ever diving in.
- Profits. It is important in real estate to sometimes start with the end of the process first. You don’t want to get too far ahead of yourself but you should consider what you would do with any profits you make. Are you looking to reinvest them and grow your business or do you want to put the money in the bank for a rainy day? Again, how you answer this will determine the best path for your business. If you are not looking for short term funds than a buy and hold rental property may be the best option for you. If you want to realize a quick return on your money than a fix and flip rehab deal may be best.
- Numbers. At the end of the day real estate investing is all about the numbers. Even if you have an accounting background you need to familiarize yourself with the specific numbers and formulas in every deal. If the numbers don’t make sense you need to step back and wait for the next deal to come your way. You also need to have an idea of what it will cost for due diligence on every deal. Between pulling title and doing your legwork there is a cost associated. These costs are magnified once you take ownership of the property and start making improvements. If you are off on your budget you will be severely disappointed in the bottom line.
Once you have some education behind you it is important that you put it to use and get started. There is truly no time like the present to begin your journey in real estate.