The Investor's Handbook
Investing in real estate can be a lucrative gig but diving in without a plan is extremely risky and challenging. Property management, flipping, and joint ventures are just a few of the many ways that investors can profit from real estate.
Because the industry has become highly competitive over the last few years, it helps to have access to all of the tools and resources you need to be successful. Here’s what you need to know to make the most of your real estate adventure.
1. Make a plan
Having a plan is the first step to being successful as a real estate investor. In order to achieve your short- and long-term goals, you need to approach everything with a business mindset.
Start by creating a business plan. This is a great way to visualize where you are and where you want to be. Seeing the big picture on paper will keep you focused and help you to push through any minor setbacks.
The real estate industry is demanding and complicated. Having a solid plan will keep you on task and organized so that you can stay focused. When creating a plan, estimate details such as:
Inflows of cash
Demographic changes
When to refurbish or upgrade a property
How many properties you want to own (or flip)
A plan of attack is the first step in paving your path to success.
2. Understand your market
Real estate investing is much more than buying homes to rent them out or buying properties to flip. An effective investor has in-depth knowledge of their market. Spend some time researching where you plan to lay your roots. Pay close attention to the geographic region as well as the differences between residential and commercial properties.
It’s also important to stay on top of current trends, especially mortgage rates, consumer spending habits, and unemployment rates. Keeping abreast of these trends allows you to plan for the current conditions as well as the future.
3. Develop a niche
The real estate investing industry is huge. To be successful, you need to identify your focus area. Many new real estate investors start with property management. This involves buying properties and using them as rental units. Or if you have some construction knowledge, you may want to start with a part-time flipping gig.
You can also choose to focus on certain markets, such as rural farm rehabs, high-end residential properties, or low-income multi-unit housing. Once you master a specific market, you can expand your vision and enter new ones.
4. Understand the risks
Real estate investing is a great way to make a solid flow of income. But the industry doesn’t come without inherent risks. And despite what you may have heard or read, being successful isn’t easy.
Real estate investing isn’t as simple as buying a property and renting it out or flipping it. It requires a lot of planning and oversight to ensure that you’re making a smart financial decision that will serve you well now and long into the future.
As a new real estate investor, you want to be well aware of the risks that you face. From bad real estate deals to legal issues, there is a lot of risk that you have to absorb as an investor.
5. Choose the best-in-class vs the best
So many real estate investors fail because they’re so focused on finding the perfect property in the perfect area. Others are overly concerned with transforming a property well beyond its surroundings.
When flipping or buying properties to rent them out, don’t fall into the trap of over-building or over-renovating. The changes you make to a property need to make sense for the area.
For instance, turning a home in a working-class neighborhood into a luxury abode isn’t going to make you the money that you think it will. It’s best to aim for best in class touches versus trying to make your property look the fanciest.
Start by fixing things that are broken or damaged. Then make small changes that don’t cost much but have a huge impact on the property. Simple things like a fresh coat of paint or new bathroom vanities are wise projects to take on.
6. Maximize the value of a property
Renovations aren’t the only one to boost property value. By focusing on the other ways to maximize the value of the real estate, you can make more profit and attract more clients.
This could involve renting out space in the lobby to a vendor to generate more income. Or if you own an apartment complex, consider value-add services like building security, trash pickup, or an on-site gym.
If you’re a flipper, consider buying and fixing a home to rent it instead of selling. Once the renter has moved in and has a lease, start looking for buyers. This is known as turnkey rental property and can easily be sold to another investor.
7. Build a network
Real estate investing isn’t something that you want to go at by yourself. Whether you plan to buy properties to use them as rentals or want to get into the world of flipping, having a network of support is an absolute must.
Your network should consist of:
Mentors
Business partners
Non-profit organizations
Contractors
These are all people that you can rely on for support and guidance. Real estate investing is all about experiential learning. The savviest real estate investors understand (and appreciate!) the importance of building and maintaining a solid business network.
Final thoughts
While success in the real estate investing industry doesn’t come easy, many investors find that the journey is well worth it. To be a successful real estate investor, you must master the art of planning, finding a niche, and making wise investments.
In addition, success also comes with the help of a professional network that you can rely on for tips and guidance. If you’re looking to make real estate investing a long-term business, be sure to keep these tips and tricks in your back pocket.
If you are looking for a mentor and investment contractor look no further than Larossa Construction. We are here for you through every step of the process. Contact us today to talk about your needs and let's put together a plan for a partnership that will make your vision a reality.