As a real estate investor, you are expected to walk a fine line between preparation and action. On one hand, it is important to take steps to prepare yourself before you get started. On the other, all the planning in the world won’t do you much good unless you take action. There are several things you should do after you decide to get started and before you make an offer. There are a few things that will go a long way in determining just how successful your business will be. Here are the six most important things you should do before you start investing:
1. Establish goals and create a plan: What do you want out of your real estate investing career? Are you looking to generate enough income to quit your full-time job? Do you want to close one deal every six months? Is it enough to acquire one buy-and-hold property a year? Whatever your goals are, you need to lay them out before you get started. Use these goals to guide your impending actions. In addition to your goals, devise an action plan. Saying you want to make $1million a year means nothing without a roadmap for success. Write down what you plan to do every week. Make a commitment to stick with it for at least 90 days. Every good business starts with a plan. Before you do anything else, create a plan.
2. Learn the business: There is a lot to learn when you are just starting out. Instead of trying to master everything about every niche, focus on the big picture. Educate yourself on the areas that will have a direct impact on your business. Understand how to make an offer and what a good property is. Develop a starting point for breaking down the numbers and what certain things cost. There are numerous books and websites that can help you gain the knowledge quicker than ever. You can also attend local networking meetings and investment clubs. Find someone who invests in your area, and is willing to let you pick their brain. All it takes is one or two bad deals to make you sour on the business. Decrease your chances of this by learning the business before you start.
3. Understand the market: Buying an investment property is different from buying a property you would live in. Even if you have bought and sold a few houses, wearing an investor hat is much different. It is critical that you know everything about the market that you plan to invest in. If you have never bought an investment property before, take a look at some before you move forward. Walk into local open houses and get a feel of what is in your market. Reach out to your real estate agent and try to see as many different types of properties as you can. Look at the transaction history in your local newspaper. When you do make your first offer, you want to be as prepared as possible. Do your homework and make sure you understand your market.
4. Look at the numbers: Numbers are the basis for almost everything you do in the real estate world. In every deal, there are a handful of numbers and expenses that impact the bottom line. You need to know everything, from the purchase price range you are comfortable with to the cost of the flooring you want to use. If you are looking to get involved in rehabs, you need to understand various cost of repairs, materials and expenses. There is nothing wrong with leaning on your real estate agent and contractor to help walk you through the process. Too many investors fail to remember that the business is about the numbers, and not just accumulating properties.
5. Have a marketing plan: Marketing is the engine that makes your business go. You can have knowledge and motivation, but without deals to work on, you won’t get very far. As you decide to enter the business, you need to have a strategy for how you will get your phone to ring. One of the misconceptions about marketing is that you need to spend thousands of dollars. There are a handful of strategies that will cost you little to no money at all. The most important aspect of marketing is to stay consistent with it. You will always face some degree of trial and error, but you need to be willing to be in it for the long haul. Leads will not just fall into your lap; you need to go out and get them.
6. Understand time commitment: Many new investors enter the business while keeping their full-time employment. While you don’t need to dedicate 40 hours a week to real estate, there will certainly be a significant time commitment needed. Balancing your full-time job, investing, family, friends and hobbies may take some adjusting. You need to figure out when you can do certain tasks, and how much time they will take. You also need to understand which tasks are essential for your business and merit the most attention. There are only so many hours in a day; when wearing many different hats, how you spend them makes all the difference.
There is an adjustment period entering any new business, and real estate is no different. Instead of rushing to get started as quickly as possible, take a step back and make sure you are comfortable in these six areas.