Lots of Americans have the dream of owning and investing in real estate, from long term holds to quick flips. We get excited watching those HGTV shows, thinking it’s easy and lots of fun. Truth be told, investing in real estate is lots of hard work. From finding something quirky behind a wall, tenants not paying rent, and running out of capital, investors are consistently problem solving and conquering all challenges thrown their way.
It’s not easy to become a profitable investor, reaping the rewards. Great cash flows and ROI (return on investment) awaits us all, only if we are willing to work hard and continuously learn. To have a fighting chance on coming out ahead on your first deal, first time investors need to learn about the due diligence process, establishing good business partners and being prepared to work. This isn’t easy so I’m here to help you and share my insights.
Do your homework and get intimately familiar with your purchase
- Choose a few target areas for investing. A recommendation is to be close in proximity to your investment, somewhere easy to get to and close to home. Determine those areas that you have some familiarity with and start learning more about the neighborhoods.
- Ask yourself the following questions when investing in certain areas:
- What do tenants or purchasers value?
- Which amenities are most important to them?
- What are the current market conditions?
- Understand the physical asset. You probably are just getting your start so I strongly recommend bringing in a property inspector and have him/her inspect every nook and cranny. Ask them lots of questions about the condition of the big ticket capital items, roof, plumbing, electrical, façade, etc.. They will be happy to share their insights and soak all that information in. You’re the one paying the inspection fee so get the most out of the experience.
- Review prior year income statements and determine if actual income and expenses are in-line, checking against similar asset type and neighborhood comparisons. You can keep it simple and look up rental prices on Craigslist or see what similar properties sold for in the neighborhood during the past three months. Your real estate broker will also be able to share some valuable information so feel free to use them as a resource.
- Create a simple financial model to help you forecast your project spend and future returns. Don’t get fancy when you’re starting off, just make thoughtful assumptions. The team at Leading Edge Realty Advisors is always available to help you through this exercise.
Know who to call for help
- Real Estate is a team sport and real estate professionals love talking about deals. Make sure to grow your network and partner with professionals you can trust to help you solve your challenges.
- Get referrals for future business partners. People usually don’t recommend bad business partners.
- Identify your business partners ahead of time instead of scrambling while in crisis mode.
Get your hands dirty
- Real Estate is not a 9-5 gig unless you’re working on the 39th floor of the downtown office building.
- Issues will come up all the time, you will always have problems.
- Those that learn how to positively react to problems will have a better chance of being successful.
So who’s ready to get their feet wet and find their first investment property? If you’re ready to learn more give Leading Edge Realty Advisors a call at 847-361-3420 to find out what we can do to help you.