If you are like most real estate investors, you want to hit the ground running. Ambition can go a long way, and it is in your best interest to remain proactive. To that end, what you do in your first 90 days will often set the tone of your entire business. While it is human nature to want to dive right in and close as many deals as possible, you need to have an understanding of what it is you are getting into. It is unrealistic to assume you know everything before you even start. Mind due diligence and educate yourself on what you need to know. If you aren’t sure where to start, here are five things every new real estate investor should know:
1. Start Small & Local: There is a good chance your first deal won’t net $1 million. In fact, it may not even reach $100,000. While huge profits are entirely possible, it takes time to learn the industry. Getting your foot in the door may mean taking on whatever smaller deals come your way. Working on these deals will give you an opportunity to learn the business while still making a profit. You will certainly not retire from what you make, but it will give you an idea of what you need to do on every deal. If you are looking to hit home runs, you may need to temper your expectations at the beginning. If you are lucky, you will hit one home run a year. Sometimes you may need to make a little less just to get a deal done. When you are just starting out, focus on smaller deals inside an area you are comfortable with. This is one of the best ways to truly learn the business.
2. Grow Slowly: It is unrealistic to go from no deals to working on six at once. Seasoned real estate investors have a difficult time handling multiple projects. This isn’t to say that you should turn deals away, but you need to grow at your own pace. Taking on a deal when you have a full plate can cause you to overlook an area that causes you to lose money. At the same time, being ready for more deals doesn’t mean you should quit your full time job. There is a big difference in taking on leads and actually closing deals. This could take several months or more to get the hang of. In growing too quickly, you can damage your business in a way that may be difficult to recover from. There is nothing wrong with closing one deal a month until you are ready to take on more.
3. Be Ready To Work: Despite what you may see on TV, investing in real estate is requires a lot of work and a lot of time. You may need to knock on some doors or attend after hours networking meetings. You may need to put together a direct mailing campaign and be ready to act when it hits. Regardless of what you decide to focus on, it will require hard work to be successful. Often times, deals will go to whoever is willing to outwork everyone else. You should expect to work nights and weekends just to keep up with your competition. As simple as being an investor is at times, it takes hard work to be successful.
4. Understand The Process: You don’t necessarily need to be an expert in every area, but you can’t be clueless either. Before you make any offer, you should understand what is going on. This is important not only with the offer itself, but whatever you plan on doing with the property. If you are looking to rehab, you need to know what it entails. If you want to add to your portfolio and rent, you need to know what is required as a landlord. It is very difficult to lead others unless you know what you are doing yourself. Go to the property and see how others do things. This will give you a good idea of how the real world works. The better you understand the process, the better investor you will be.
5. Trust the numbers: Even if you have a few deals under your belt, you will always be on the lookout for more. It is important that you never let your emotions get in the way. You need to trust the data and the numbers that you are presented with. There are ways to shape these numbers to make them appear to work for the property. However, in manipulating the data, all you are doing is setting yourself up for trouble. Forcing numbers will lead you to take on a bad property that can set you back. Instead, do a little research, and make sure everything adds up.