We’ve been buying, selling, and helping real estate investors since 2006. Never, despite great markets, have we seen more people wanting to get into real estate investing than we are seeing right now. There are several reasons which could make up an entire other blog post (and might). For today’s purposes, we’ll skip that and get to the point. We get LOTS of questions and are glad to answer every one of them. The real problem is that most of the questions are the wrong questions for people who are just getting into things. My opinion is that they go to a seminar or read a book and they, naturally, begin to put the cart before the horse, mostly out of excitement.
Here are the top five questions that we think investors should start out with:
1) Do you have the mindset for this?
Despite what you may have read, researched or seen on TV or in a seminar, investing in real estate is not a get rich quick scheme. It is a get rich in a very methodical, often slow, way. You can and, with discipline, will get rich if you stick to it, but the most successful real estate investors have a mindset that sets them up for success. You can’t just say, “My new year’s resolution is to become a real estate investor and be rich!” The best investors we work with are a mix of entrepreneurial, organized, patient, risk averse but not to the point of stagnation, and focused. If you’re not those, it doesn’t mean you can’t be successful, but it will be more work.
2) What’s your why?
If the answer to this question is to be rich, you will likely have the same results as a person who goes to the gym because they don’t want to be fat anymore. You’ll mess with it for a while, spend some money, and lose interest quickly. You have to know your why. Why are you really doing this? Is it because you want to escape the rat race, put kids through college, buy that dream home, or keep your spouse at home with the kids? It could be anything, but it has to be something that is deeply important to you and not purely monetary. Find your why before you find your first property.
3) Do you have goals and systems?
This is the most plain and simple one out there. Do you have goals? Are they S.M.A.R.T.? Once your goals are written down, put systems in place ahead of time to reach your goals. Do this before you even start looking. Lay out everything from criteria to uniform color schemes. If you don’t do this in advance, I promise you that you will kick yourself in the butt later. Good systems will result in less stress, lower costs, reduced time frames, and more money.
4) Are you prepared to fail?
Despite what you may have heard, seen, or read, people do fail as real estate investors. More often than not, it is because one or more of the three questions from above went unanswered or done wrong. It happens. Are you prepared? How will you deal with it? Will you fail and bail or will you fail forward and carry on? Look, it’s a lot of money and impact on your credit, health and state of mind if you fail. Know how you plan to deal with it before you find yourself already there.
5) What is your exit strategy?
No matter what your level of success is, at some point you will need/want to sell one or more of your rental properties. If you’re a flipper, this is doubly important for you. When do you sell? What do you sell? How can you plan for that eventually when you purchase? How will you handle the proceeds from the sale? This is an important question and one that needs to be taken seriously before you buy a property. Waiting until you are ready to sell can cause you to take losses and act irrationally. It’s better to have a plan ahead of time.
In conclusion, you have a lot to consider when becoming a real estate investor. There is always time for things like lenders, contractors, etc. Having a solid grasp of who you are as an investor and why you are doing it, how you are going to do it so you don’t fail, and what you will do when you are looking for an out will give you a solid foundation, minimize errors, and maximize returns.