A real estate investing career is a serious matter. Sure, this job can be exciting and unique. However, fun and excitement also comes with risks and losses. In fact, real estate investing is not for the faint-hearted or the weak-willed. Here are the things you should know before beginning your real estate investing career.
Starting a Real Estate Investing Career: Things to Consider
In this article:
- What Type of Investor Do You Want to Be?
- What Is Your Risk Tolerance?
- How Are You Going to Finance it?
- Out of Sight, Out of Mind — Or Hands-on?
- What is Your Ultimate Goal?
1. What Type of Investor Do You Want to Be?
There’s no doubt about it even when I go to barbecues, I’m really fascinated by the different types of people that want to get into the property market. What type of property investor are you? https://t.co/OynJOmcy9o pic.twitter.com/wm0S5gn0Ee
— Axon Property Group (@AxonProperty) November 20, 2017
Craig Berger, co-founder and principal at Avid Realty Partners in NYC, says, “Develop and identify the strategy that you think is best suited for you and your situation in life. Do you want to be a passive investor that invests in other peoples’ deals, or do you want to be an active investor that pursues your own deals?” There are many ways to invest and each one has its benefits so play to your strengths.
2. What Is Your Risk Tolerance?
Like anything in life, it’s all about risk vs reward. You could buy a condo in a stable area that won’t see much appreciation but will be easy to rent out and you’ll get your check every month. On the other hand, you could take abigger risk and buy a multi-family house in an area you think only a few people are going to appreciate. It might be difficult at first, but it will (hopefully) payout in the end. At the end of the day, you’re the only person who knows the level of risk you’re comfortable with.
3. How Are You Going to Finance it?
There are many ways to finance and buy a property. Do you want to do 20% downpayment, get a good rate, and get a shorter mortgage? Or do you want to put down as little as 3%, which will give you a longer mortgage, but will leave you with more capital to use on improvements? If the house needs work, you could also get an FHA 203(k) loan which will add construction funds to your mortgage. Another option involvesjoining an investment club. These are a group of people that pool their money to make investments. Additionally, you can refinance your current property to free up some money or to take out a HELOC (home equity line of credit) loan which gives you a line of credit against your home.
4. Out of Sight, Out of Mind — Or Hands-on?
Are you looking for an investment that you can buy and then not have to worry about afterward? Then you might lean more towards a condo or other property that comes with a property management company. That way, the day-to-day stuff and renting will be handled by the management company, and you only need to be involved in large decisions. Fortunately, you can buy this type of property anywhere in the country.
In contrast, if you are a handy sort and want to save money, perhaps you want to get a property that is near you. You can rent it out on your own and do your own work on it. This is all completely dependent on your desired level of effort.
Berger concludes, “While this may seem like a lot, learning this business is hard and takes years of effort and work. Still, the results can be very impressive as you learn to make money and grow your nest egg.”
5. What is Your Ultimate Goal?
A career in real estate investing, like any career, must have a long-term vision. Every success mentioned above will not simply manifest and materialize if you do not have the passion for what you are doing. You have to determine both your personal and financial goals, if you want to get serious in this field. What kind of investment do you want to make? Do you want to be known for your residential property investments? Or do you want to succeed in the commercial and business world? Decide and then conquer.
Contemplating these things can help you decide whether a career in real estate investment is for you. Don’t let risks and losses stop you. Remember, you just need to find ways to keep moving forward and find your game.
What other things did you consider before pursuing a real estate investing career? Let us know in the comments below!
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Editor’s Note – This post was originally published on June 1, 2017, and has been updated for quality and relevancy.
