As prepared as you may think you are, there is always more you can learn. You know the nuts and bolts of the business, but it is the real world information that can make all the difference. Instead of making mistakes on your own, why not learn from the people around you? Before you sign your first contract, here are five real world things that every new investor should know:
1. Find a work/life balance: Getting started in any new endeavor is an exciting time. Regardless if you are opening a food truck or writing a novel, your new commitment will require your full attention. While it is necessary to have passion and commitment to your real estate business, you also need find a balance. Without this balance, you will get frustrated, annoyed and ultimately burnt out with what you are doing. This doesn’t mean you should work less; it means you need to find a way to balance your time. Maybe you have to wake up a little earlier to get in what you need done before your family wakes up. It could mean staying up a little later or skipping your favorite TV show. There is no question that you will make some sacrifices along the way. What you can’t do is totally immerse yourself in your new business and ignore your family, friends and the rest of your everyday life. It takes some time to accomplish, but the quicker you can find a work/life balance, the better your business will be.
2. Understand the cost of business: One of the biggest things that most investors forget is that they are running a business. It doesn’t matter if you buy a property a year or one a week, you need to treat real estate like a business. This means being willing to spend money and cover certain expenses. Everyone understands that there are some expenses that are just expected. You may need to order an inspection or title search on a property that never ends up closing. You will end up pulling the credit on a prospective tenant that never spends one night in your rental property. There are numerous examples of expenses that will be made where your return is minimal, if anything at all. Without having the capital for these, or the willingness to open your checkbook, your business will not be able to grow. Sure, you may get lucky and find a deal, but without ordering an inspection you open yourself up for disaster. From the minute you spend your first dollar on real estate, you are a part of the business; so treat it like one.
3. Time is money: We all understand that there are only so many hours in a day. As a real estate investor, there is no time clock you need to punch or weekly paycheck to collect. You get paid directly, based on how productive you are. This underscores how important it is to be organized and efficient in your efforts. Once you get rolling and have a few deals in your pipeline, you need to know how to balance them out. If you put all your eggs in one basket and the deal falls through, you may not be able to work the other ones. Everything you do should have an impact on your business. You need to know that the time you spend away from your business has a direct impact on your production.
4. Multiple exit strategies: How you want things to go and what actually happens are often quite different. Even if you are confident that your home will sell at your price or rent for the amount you anticipate you need to have other exit strategies in place. There is nothing that gets real estate investors in trouble faster than not having a plan B & C. Maybe you will use them and maybe you won’t but you need to have these options available. Without them you will be forced to choose between the best of only bad options under pressure. Every day you delay in making these decisions costs you money and can make the problem worse. Before you get started in any area of the business you should consider the worst case scenario and how you would react. The more prepared you are the easy it is to react.
5. Start in local areas: One of the things that makes real estate so great is that there are no boundaries as to where you can invest. You can invest in a property three states over just as easily as you can three counties over if you like. While the options are there for you it is best to start in local areas that you are comfortable with. By choosing areas you know you will make better decisions. You can find almost anything about a property online but this may not tell the whole story. Plenty can change in the span of just a few miles. These changes can make a huge difference in the appeal of a property you are interested in. By sticking to areas you can drive to you can do your homework on these properties almost any time of the day or night.
Regardless of where you are in the business, use these five pointers to help you take the next step.