How To Tackle The 5 Most Common Hurdles New Investors Face
By Paul Esajian on January 26, 2018
Real estate investing is largely about solving problems. It is very rare that things will go exactly how you planned on a given transaction. If you watch any of the investing shows on TV, there is always a curveball right around the second commercial. These problems may be exaggerated for TV, but they are not uncommon to the business. How well you handle whatever is thrown your way often determines just how successful you will be.
The problems you face when you enter the business may change over time, but they are the core pillars of real estate. Finding money, generating deals and building a quality team can seem daunting at first but like anything else can be tackled with a little perseverance. Anyone can invest in real estate if they are willing to be a problem solver. Here are some tips to help tackle the five most common hurdles new investors face.
- Finding financing. Everything in real estate revolves around financing. You can have plans of market domination but if you cannot finance your deals you won’t get very far. One of the things that makes investing in real estate so great is that you do not need tens of thousands of dollars to get started. Sure, it can be a help but there are ways to get started without it. There are more hard money lenders out there than ever before. A quick search online or a few calls to your local contacts can probably put in you touch with a handful of investors in your area. From there, it is up to you to make your presentation and express your plan. In addition to hard money you can reach out to your friends, family and co-workers to see if anyone you know has an interested in funding a real estate deal. Finding financing is a challenge but there are often more solutions than you think.
- Generating deals. It is not enough to find potential deals, you need to find deals that close. This process is one of the most painstaking areas new investors face. It is important to understand that real estate investing is a numbers game. You can talk to ten homeowners without any traction, with the eleventh one being the charm. If you do not have the same enthusiasm and mindset with every new deal you will have deals fall through the cracks. Fortunately, there are several inexpensive ways you can generate leads. Between social media, networking clubs, bandit signs and personal contacts you can generate a fair amount of deals per week. It is up to you to diligently work every lead and follow up with them down the road. There is no such thing as an easy, slam dunk deal that will be given to you on a silver platter. Remember, if investing in real estate was easy everybody would do it.
- Getting offers accepted. In the world of real estate, everybody is on equal footing. A new investor making their first offer has the same chance as a twenty-year veteran. It may not seem this way at first, but it is reality. Where new investors get frustrated is not knowing exactly what to offer and how to structure it. It is ultra-important for new investors to use a real estate agent with investor experience. In most cases, it is the minor items on a contract that make the biggest difference. Price is always important, but you should avoid asking for contingencies or other petty items that only hurt your chances. Look at the comparable sales and current listings to give you an idea of your after-repair value and make your offer accordingly. There should be a line in the sand you don’t cross and a number where you are willing to walk away. Getting an offer accepted is great but if your offer is too high you won’t make any money.
- Building a team. From the outside building a team seems like a daunting task. Who would want to work with someone who has only closed one deal, or even none at all? As crazy as it sounds this is the perfect time to build relationships with your team. You don’t need to find the most experienced real estate agent, contractor or property manager. You need to find someone who shares the same vision and passion for the business as you do. This may take some vetting, but you will know it when you find the right person. Once you have your team in place things will start to get a little easier and you won’t feel you have to do everything.
- Organizing repairs. Getting an offer accepted at your price on a property you really want is a great feeling, but it is just the first step. If you are into rehabs and flips the critical piece is organizing and executing the repairs. It is no exaggeration to say that time really is money. Every day you own the property costs you money. A few extra days turns into a few weeks that can turn to months. Even if you have a contractor run your project you need to help plan everything. They will tell you what is realistic, but you need to have a vision in place before you start. The quicker you finish the repairs the sooner you can get the property sold.
Once you tackle these there will be five other hurdles you need to jump over. Facing problems is a constant battle that you will deal with in real estate. Don’t let a few problems derail your business.