Real estate investment. It’s a topic that attracts the attention of many just as often as it scares away the masses. How do you know if you are cut out for it?And is it really worth it? Let’s start off with saying this: not everyone can be areal estate investor. We aren’t trying to be harsh but that’s the real hard truth. Real property investment takes work, hard work. Real estate investment is kind of a misnomer because it’s a lot more work than most people think. People seem to think that their work ends at the investment part, but in reality, it really is running a long term proper business. The truth is that some people just are not cut out for investment in real estate just as some people are not cut out to be surgeons, military officers, lawyers and so on. To understand whether you should invest in real estate, you should first understand all the reasons why you may not want to get in to it, and why it may not be for you.
Real estate investment is no walk through the walk. It can definitely be a headache if you are not prepared for the work that is cutout for you. Of course, the rewards are definitely worth it but it’s not as easy and straight forward of a path as we sometimes think. To really reap the harvest,you really need to know what you are doing before diving straight in to the deep end.
There are a lot of real estate investors out there,but not all of them are working on the same level. Some are great at what they do and others are lacking in skills that a property investor should have. We will explore some of the qualities that a good real estate investor should have and the truth about what it truly takes to become one in the industry, and a good one at that.
Real estate investment takes a lot of hard work
There’s this inaccurate notion out there that real estate investment is a source of passive income, but there is nothing passive about it. First of all, the industry is not one for the faint of heart. There’s a lot on the line and you need do be able to handle a multitude of tasks with perfection. An eye for detail really helps in this department as well. Here are some things you will need to do if you are entertaining with the thought of getting in to property investment:
• Find and determine the right kind of properties to purchase.
• Properly prepare your properties to attract the best prospective clients/tenants.
• Be skilled at screening candidates to determine the best tenants for your properties.
• Be willing to work non-traditional hours. You may need to take calls, answer emails, respond to text messages all throughout the day to either personally address client/tenant related issues and concerns, or coordinate with professionals to delegate the list of tasks to.
• Be on schedule about collecting rent and chasing late rent.
• Deal with clients/tenants on an ongoing basis and maintain cordial relationships.
• Evict tenants for not paying rent or violating the lease agreements.
• Be responsible for fixing up, and cleaning up lived-in properties when tenants move out.
• Schedule and perform routine maintenance and check ups with properties and with tenants to retain the value and quality of your portfolio.
• Be able to understand cash flow because positive cash flow means income is more than expenses. This should be a priority when investment in property as you will have to deal with all the expenses that come with owning a property - maintenance, insurance, property tax, vacancies,mortgage, utilities, repair and upkeep, etc.
Real estate investment is time-consuming
It’s one thing to realize you have your work cut out for you, but do you also have the time to do all of your tasks? Many of the tasks that need to be done in real estate property investment cannot be left until another day or until your schedule opens up. You will be under time-constraints and if something needs to be fixed, you are going to have to focus your attention on it right away even if you have other stuff going on. If your tenant calls you at midnight and says the toilet is not working, it’s your responsibility to answer the call and schedule a reminder to book a repair appointment at the earliest available time in the morning. If you are going to be managing multiple properties, you need to be prepared for the amount of work to get the prepared and well-managed for a rotation of tenants moving in and moving out. Every time someone moves out, you will have to re-prep the property so that a potential new tenant can move in. The demands are not easy because a multitude of things can be happening simultaneously. You really need to be good at juggling jobs and multi-tasking without breaking a sweat. You need to think about how and if you can fit this in to your life and current schedule.
Be able to spot and analyze properties and markets trends
This crucial skill is what separates the fish from the sharks. You should be able to understand market conditions and risks when you are in this game. An investor doesn’t necessarily have to know the ins and outs about investing IF he/she has good timing. It’s about knowing when is the right time to buy and when is the right time to let go and sell. Just as important as location is in real estate, timing is equally as important. A good investor should know when to buy or sell and know what to expect based on the market conditions and trends.Knowing market behaviour and such patterns acts as risk management as serves as the basis of what any beginner should know. You simply shouldn’t go in to the arena blind. Knowing how to analyze and spot properties is a vital skill to have, if you want to be successful. Understanding the dynamics of a locale is really important because you want to know the supply and demand in specific areas that you are interested in. This means research, a great deal of research! How do you find out about the demand of an area? You can start with inquiring about neighbourhood information such as its demographic, public amenities, job market, transportation, home prices, education systems, rental rates…etc.
Furthermore, it’s a bonus to understand risk management in real estate investment. With any investment, there are risks. With real estate, there’s a whole lot of risk - most often economy related. Although you cannot control the economy,there are insider skills you can learn to play your cards right so that you can continue to maintain a steady income even in the midst of an economical crisis.Of course, economical risks are the only factors that you have to be aware of.There’s also the risk of having bad tenants, tenants who consistently pay their rent late, and tenants who are unable to keep up with paying rent whatsoever or keep up with mortgage payment. There are a number of very real risks to consider as a property investor - all of which can be manageable if you have the skills and experience to know what to do.