The Basics of Real Estate Investing
Success in real estate does not come overnight, it is often the result of years of hard work and perseverance. Too many investors are more focused on finding incredible deals than they are with understanding the business. While it is important to find deals, you can significantly increase your chances of long-term success in the real estate business. Check out the five basic tenets of real estate investing below.
Understand the Markets
Many successful investors will say that understanding the markets is the most important aspect of the business. Even if you manage to find amazing deals, if the markets are poor you won’t see the kind of return you are looking for. To understand the markets, you will have to know why properties are listed where they are and where the value may be headed. You also need to familiarize yourself with statistics of the area such as the crime rate, schools, new housing permits, current housing supply, unemployment and foreclosure rates. When you know your market, and where the market may be headed, you set yourself up to buy the right properties. You will be able to close fewer deals in better areas, and allow you your properties to get turned over faster and maximize your profits. More often than not, the right market is far more important than the right property.
Network
If you want to be a successful investor, you have to network. It sounds super simple, but the more people you know, the easier it is to find deals. Networking not only helps you find deals, but it also makes your deals less expensive. You should plan on doing something every single day that will help you network within your local community. Join social media groups, investment club meetings and networking clubs to maximize your exposure and the amount of potential deals you are able to find.
Deal Generation
Networking is an important part of deal generation, but there is more to it than knowing the right people. One of the worst things you can do as you enter real estate investing is waiting for deals to just fall into your lap, you have to get out there and make them happen. When it comes to how you plan on generating deals, find a handful of methods that work for you and be consistent. Whether you are reaching out to sellers on Craigslist or using a direct mail marketing approach, stick with it for a designated amount of time before you decide to try something else.
Understand Value
The goal with any investment property is to buy low and sell high, which doesn’t come as a surprise. However, what many would-be investors don’t know is where to create value. Investing is not as simple as performing work and upgrades on a home, to be successful you need to do the right work for the market because not all work will lead to substantial returns. Study both the past sales and current listings to see what amenities/improvements are having the greatest impact in your area. Focus your time and energy on the work that buyers in your market will find most appealing, because this will create demand for your property, which increases your chance of selling high. Successful investing is not just turning the property over, it is creating value in a property and seeing a significant return on your investment.
Analyze One Deal at a Time
Multitasking is a skill most people have had to master, but when it comes to investing in real estate, you want to keep a singular focus. While focusing on only one thing at a time can be more difficult than trying to juggle many, doing so will keep you from losing sight of where you are with your projects. Dedicate time to creating a spreadsheet for your deal, then analyze it from every aspect. Make notes of the location, condition, current list price, repair estimates and any offer you made on the property. You should have a good idea as to why you passed on the property, or why your offer may have been rejected. Think of those things you could have done differently to acquire the property and don’t move on to your next project until you have fully analyzed your current deal.
If you are strong in these five areas of real estate investing, your business will be strong as well. These are the absolute basics you must master in order to maximize your income and see the greatest returns. Master these and you are well on your way to becoming an incredible real estate investor.