Looking To Get Started In Real Estate? Start By Answering These Five Essential Questions
Anyone can invest in real estate. You don’t need a degree or an expensive license to make an offer. Someone with twenty years’ experience has the same opportunity as a new investor looking for their first deal. Many of the real estate investors you see on TV struggled for years before finding their grove. The reality is that every experienced investor has been in the exact same shoes as you, looking for the right path to follow. As much as you may want to dive right into the business you should take a step back and figure out how to best go about it. The decisions you make in your first 90 days will influence the trajectory you take for months to come. If you are looking to get started, or simply want to change your business, here are five essential questions you need to answer.
- Will I invest full time or part time? How much time you can dedicate to the business will influence almost everything you do. There is a huge difference between an investor looking to supplement their income and one only looking for a deal a year. If you have a job that doesn’t give you a lot of flexibility during the day you may be hamstrung in how you invest. Conversely if you have a job where you can talk, email or text freely you may be able to stay employed while still building a portfolio. The first thing you need to figure out as you start your real estate journey is how much time will you be able to dedicate to the business. Everything else you do will be impacted b this decision.
- Where do you see yourself 1, 3, & 5 years from now? One of the most common job interview questions is always where you see yourself at some point in the future. As you start your investing career you should ask yourself the same question. What is it that you want from the business? Do you want to have multiple rental properties in your portfolio a year from now? Do you want to have a bulk of your income tied to your rentals five years down the road? Do you simply want to rehab one property the next twelve months? Whatever your goals are for the future you need to acknowledge them. These goals will help you make decisions and will drive you when you are in a rut. They will steer you to certain markets and give you pause to avoid others. Your goals can change over time but when you are starting out you need to clearly define what, when and how you want your business to go.
- Do you have financing in place? Any grand vision you have for your real estate career is directly tied to your financing. Without financing even the best plans won’t get too far off the ground. In a perfect world you will have excess capital to fund your own deals. A more realistic scenario is that you will need to find lender financing for your rentals and hard money for your flips. Fortunately, both options have become more readily available in recent years. With lender financing you will need to come up with anywhere from 20-25% down payment. With hard money it should not be too difficult finding multiple sources in your market. Hard money has become much more popular since the recession. With lending guidelines ever-changing hard money is often the easiest and more common form of financing. Instead of relying on lender approval you can get a decision on your offers much quicker. This allows you to close more deals and dramatically improve your bottom line. If you don’t have financing options in place your business will not get too far.
- Do you want, or need, a partner? Do you have an idea of how you want to conduct your business? Once you know how much time you can commit and what kind of deals you will pursue you can them piece together and who you may need around you. If you have money but don’t have the time to work any projects you may need a partner to help fill in the gaps. If you have managerial expertise and can manage your rehabs you may just need a financial partner to help get off the ground. However you plan on doing business you should evaluate how much a partner will help grow your business. If you feel the impact would be minimal you can try to go it alone. If you feel that a partner is the only thing holding you back, you should start searching for the perfect partner for you and your goals.
- Are you willing to sacrifice? The real estate business isn’t easy. Even though there is opportunity abound you need to work for it. If you think that deals are going to just fall on your lap you are mistaken. Making money in real estate requires you to stay on top of several different areas all at once. You will need to sacrifice some time on the weekends, watching your favorite show in the evening or giving up some sleep in the morning. In the big picture it will all be worth it, but you need to have this mindset before you get started.
These five questions will give you a jumpstart in your business. Take your time answering them and more important, act on them when you are finished.