This article presents six things real estate investors should do to prepare themselves for a successful real estate investing endeavor. From attitude to real estate investment software, each of the six suggestions, if practiced, will better prepare you for the challenges associated with real estate investing that lay ahead.
1. Develop the correct attitude. Foremost, bear in mind that real estate investing is a business, and that you are about to become the CEO of that business. You are not a home buyer. So look beyond curb appeal, exciting amenities, and desirable floor plans unless they contribute to the income and focus on the numbers. Real estate investment property is a matter of the head, not the heart. “Only women are beautiful,” an investor once told me. “What are the numbers?” Lay emotions aside, and prepare to make your investment decisions based on the property’s cash flow and rate of return.
2. Develop an investment goal with meaningful objectives. Have a plan with stated goals that best frames your investment strategy. What do you want to achieve? By when do you want to achieve it? How much cash are you willing to invest comfortably, and what rate of return are you hoping to generate? <!– /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-parent:””; margin:0in; margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:12.0pt; font-family:”Times New Roman”; mso-fareast-font-family:”Times New Roman”;} @page Section1 {size:8.5in 11.0in; margin:1.0in 1.25in 1.0in 1.25in; mso-header-margin:.5in; mso-footer-margin:.5in; mso-paper-source:0;} div.Section1 {page:Section1;} –> A stated investment goal with meaningful objectives is one of the most important elements of successful real estate investing. Have it prepared and worked out in your mind before you start purchasing.
3. Research the real estate market. Understand as much as possible about the conditions of the real estate market when you plan to invest. Learn property values, rents, and occupancy rates. You can turn to a qualified real estate professional to run a comparable market study for you, or have the county tax assessor help you. You must always be prepared to recognize whether an investment opportunity is fairly priced or not; whether it offers a potential to make real money or not.
4. Learn the terms and returns and how to compute them. Get familiar with real estate investing terms such as APOD and Proforma, and rates of return such as cap rate and cash-on-cash. Learn the formulas and calculations. There are sites online that provide free information, so prepare to do some home work and gather as much data on the terms and returns as you can . It will keep you from looking like a deer staring into the headlights of a car when hear them discussed.
5. Invest in real estate investment software. Having the ability to create your own rental property analysis gives you more control about how the cash flow numbers are presented and a better understanding about a property’s profitability. So prepare to purchase quality real estate investment software. The benefit it will provide you is well worth the meager investment.
6. Create a relationship with a specialized real estate professional. The emphasis here is to work with a real estate agent that knows the local real estate market and understands rental property. It won’t advance your investment objectives to spend time with an agent unless that person understands the nuances of real estate investing and is adequately prepared to help you make wise investment decisions. If you’re planning to get assistance from a real estate professional, prepare to seek out a real estate investment specialist.
