Since real estate investing involves actively working with people, an investor's reputation is likely to be far-reaching. Effective real estate investors know it is better to conduct business fairly, rather than seeing what they can get away with. Develop a Focus or Niche Because there are so many ways to invest in real estate, it is important for investors to develop a focus in order to gain the depth of knowledge essential to becoming successful. Taking the time to develop this level of understanding is integral to the long-term success of the investor.
Once a particular market is mastered, the investor can move on to additional areas. Savvy investors know that it is better to do one thing well than five things poorly.
Get Good at Customer Service Referrals generate a sizable portion of a real estate investor's business, so it is critical that investors treat others with respect. This includes business partners, associates, clients, renters, and anyone with whom the investor has a business relationship. Stay Educated As with any business, it is imperative to stay up to date with the laws, regulations, terminology, and trends that form the basis of the real estate investor's business.
Keeping current requires work, but it can be viewed as an investment in the future of the business. Investors who fall behind risk not only losing momentum in their businesses, but also legal ramifications if laws are ignored or broken. Successful real estate investors take the time and make the effort to stay educated, adapting to any regulatory changes or economic trends.
Understand the Risks Those choosing to invest in the stock or futures markets are inundated with myriad warnings regarding the inherent risks involved in investing. Are you starting with nothing? Document your current situation and update it whenever it changes. As you move forward with your investments, it is always important to have complete documentation of your finances at the ready.
One last thing— remember that road maps and business plans are guides, not rules. A business plan is meant to provide direction and to motivate you to follow through. It is designed to keep you headed in the right direction at the correct speed. When you have a clearly defined business plan, carrying out the plan and envisioning the end game becomes much easier. However, if you hold as tightly as you can to the map you've created, you will pass through the obstacles and eventually come out at your destination.
If you talk to investors who have a few failures under their belts, you'll find that the majority of failures were due to a lack of preparation and planning. Don't fall into this trap. Assembling Your Team As an investor you are required to wear many different hats, but you don't need to and can't wear all of them.
Instead, you need a team. When we refer to your team, we're not suggesting you go out and hire a team of employees to work under you. A team is merely a collection of individuals in various businesses that you can rely on to help you move your own business forward. Here's a brief look at who should be on any winning real estate investing team: Mentor—Every successful entrepreneur needs a good mentor, a guide.
By training under the watchful eye of someone smarter or more experienced, we can only get smarter. For more information on mentors, see chapter 4.
Find someone who has experience working with other investors, someone who is creative and smart. Many loan officers have a pipeline of buyers or future buyers set up; real estate investors can use the help of local loan officers to build a list of buyers and lease purchasers. Real Estate Attorney—It is important to have someone on the team who can go through contracts and knows the legalities of your moves. Don't try to pinch pennies by foregoing this valuable team member.
You don't need to meet for hours with your attorney each week, but he or she should be available when you need. Having an attorney who is skilled and has real estate experience is highly important to the success of your career.
Keep in mind, attorneys can be compensated through fees collected from an acquisition or disposition of a property.
Escrow Officer or Title Rep—If you live in a state that uses title and escrow companies, your escrow officer or title rep will be the person responsible for closing the deal, taking you from the offer to the keys. Having this person on your team helps to close deals that much quicker.
You always want people around who will look out for your interests. Accountant—As you acquire properties, doing your own taxes and bookkeeping will become increasingly difficult. As soon as possible, hire an accountant preferably a certified public accountant. Your numbers person should also be well aware of the ins and outs of real estate and will preferably own rental properties of their own. Come tax time, this is the person who will help you through the write-offs.
A good tax accountant will save you more than the cost of their service. Insurance Agent—Insurance is a must, and as an investor, you will probably be dealing with a lot of insurance policies. Be sure to shop around for both the best rates and the best services. Do not skimp out on getting insurance. You never know when you'll need your policy. Contractor—A good contractor is often the most difficult team member to find. Contractors can make or break your profit margin.
Find someone who gets things done on time and under budget! Be sure that your contractor is licensed, bonded, and insured in order to protect yourself. Don't simply hire the cheap guy. If your family or spouse are not on board, don't invest until they are. Realtor—An exceptional real estate agent will be fundamental to your investing career. Either way, working with an agent who is punctual, eager, and a go-getter is essential. Real estate agents make money from commission when a property is sold.
Agents can also be an excellent resource for contract real estate work, which may include the following activities: bird dogging, referring buyers, showing properties, open houses, price opinions, and more. Property Manager—If you don't want to actively manage your properties, a good property manager is important to have.
A good property manager can be hard to find, but finding one who can efficiently manage your rentals will make your life significantly easier. Ask other landlords for great handyman referrals.
One of the best sources for finding these team members is through referrals from other investors. In general, another investor should be happy to refer their handyman, mortgage broker, or accountant to you because it reflects well on them and their relationship with that professional.
Try asking around at your local real estate investor club or here on BiggerPockets, and you'll be well on your way toward putting the pieces in place. A great real estate team is defined by its ability to consistently produce reliable results. Investors, especially ones with large portfolios or those who flip a lot often both , rely on their team daily.
When one member fails, the entire endeavor suffers, sometimes to the point of sabotaging the team's goals altogether. There are those who do—and those who make excuses. The latter will pull you down faster than you could ever imagine. I found this business to be extremely difficult and frustrating until I built up a solid team around me, at which point it became much, much easier. For example: Are they really experts? Do they interact well with everyone? Are they a pain to contact?
Do they return calls and emails quickly? Do they hit deadlines? Do they produce, as promised, when promised? Can they communicate clearly and efficiently? Before beginning your real estate journey, you will need to decide if you want to pursue your career on your own or with the help of a partner.
This decision is not the same for everyone and depends largely on your knowledge, time commitments, abilities, talents, and timeline. If a partnership is something you plan on pursuing, the kind of partnership becomes important as well. Some individuals choose to invest with a partner from the start.
To start looking for and analyzing the best real estate investment properties in your city and neighborhood of choice, click here. Real Estate Investing Business Plan: Financial Plan Financing a real estate investment is a major concern for beginner property investors. To set a good financing plan, you first need to assess where you stand financially today. How much cash do you have? Do you have any equity that you can tap into?
You may be capable of buying your first investment property with cash, or you may need to consider alternative financing options. Your real estate investing business plan should clarify the exact model of financing. Additionally, make sure to update your financials as your business grows. This section of the real estate investing business plan will cover how you intend to market your investment.
To have an effective marketing strategy, property investors first need to target a specific audience. For example, are you renting out to millennial tenants or baby boomers?
Rental Properties As previously mentioned, careful attention will be made during the purchase process to locate properties that could be entered into our long-term investment portfolio of rental homes.
Additional Real Estate Business Plan Tips A successful business plan is no impossible to create; however, it will take time to get right. This includes business partners, associates, clients, renters, and anyone with whom the investor has a business relationship. As a secondary source of income, and an opportunity to add diversity to our enterprise, we will use our expertise as a licensed builder to develop a piece of property from the ground up. Most importantly, think about the qualities you personally value and how those can fit into your business plan. Financial Analysis Each property to be purchased will go through an extensive financial analysis in a spreadsheet that has been created for this purpose. However, it is good to see what is possible.
You will need to decide which type of real estate will be the focus of your investing efforts.
It will generally consist of information about your target market, including distinguishing characteristics, size, market shares, and pricing and gross margin targets. Financial justification. Expanded Networking: Networking with others, within and outside the real estate industry, will be vital to the growth of your real estate investing endeavors.
Find your Business Opportunity Every business finds an Opportunity to exploit. In other words: How will you turn an investment property into profits?