Getting in the Game | 5 Keys to Investing in Real Estate
Long before there were landlords as we know them today, there were simply lords who owned enormous plots of land. Peasants worked the property and were dependent on the owners for their safety. In feudal times, real estate had almost nothing to do with investing and just about everything to do with birthrights and patronage.
Real estate is far more accessible today, and I don’t go too many days without a friend, acquaintance, or client asking: How can I get involved in real estate investment?
And I understand why.
People are interested in real estate investing in part because over a long period, real estate is one of the most stable investments that you can make. Everyone needs a place to call home, whether they’re going to own it or lease it. Because of that intrinsic value, real estate often functions as a hedge against inflation while at the same time playing a potential role as a generator of wealth.
We all know someone who has made a killing on a home they flipped or on a rental property they held. And because we all have some understanding of what separates quality property from something of lesser quality, we become convinced that we, too, could make a decision that brings double digit returns.
This belief is exacerbated by the flood of real estate “reality” shows that depict successful investors as those who shoot from the hip, act on that hunch, and make a quick bundle. Even though it makes for good TV, it is far from the reality of how real estate investing actual works.
My experience has been that if you find yourself a good real estate investor, one with a track record that stretches decades and not just the couple years of a crest, and you’ll find a person who has a solid plan and executes it. I have seen it work from small decrepit single-family homes to multi-unit residential buildings in the finest corners of the city.
Time and again, I find these investors share some critical practices.
5 Keys to Successful Real Estate Investing:
1) Establish a clear objective— Successful investors have formed an idea of what kind of property they want, what they plan to do with it, and are focused on meeting that goal.
2) Research, Research, Research— You’ve probably heard something similar, but with location instead of research. Understanding location is really a product of research in action. The best investor has someone in the trenches every day, eyes open, ears to the ground, sopping up all the information available. Knowing how to profit from that research data is where experts shine.
3) Understand the Now and the Future— No one can predict the future. But simply assuming future demand will mirror the past can lead to disaster. It’s a lot easier to anticipate changes in the market’s direction when you’ve been looking forward the whole time.
4) Set a realistic budget— This sounds so obvious, but too often the novice investor blows it, whether it’s the purchase price, the cost of renovation, or estimating the rent roll. Spending the right amount of money, the right way, is critical. Assume the worst and budget accordingly.
5) Partner with experts— There are too many moving parts to real estate investment to master them all. Know who’s the best lawyer, the best engineer, the best plumber for the work you need to do. Everyone has a buddy, but connect with the finest and know that your investment will be in safe hands.
Don’t let anyone tell you real estate investing is easy to do. But it is within your reach, as long as you partner with the right people and you’re willing to put the necessary work in.
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