Preparing to invest in your first property should be approached with a plan. As you begin your journey into real estate investing, you may be nervous, anxious and possibly a little scared. Those are perfectly normal feelings – after all, you’re learning something new and it’s going to be a big investment. Don’t freak out. Breathe. You’re going to be just fine. In fact, you might really enjoy this journey.
In preparing for this first investment, there are five things you can do to prepare for this new world. Once you see them and start using them, they will be a simple part of your processes for every deal, whether you realize you are doing them or not.
1. Decide where you want to invest
Many people that self-manage their properties only buy in the towns or communities in which they live. Other real estate investors choose to invest exclusively out of town and turn over their properties to property managers.
2. Decide what kind of real estate investment you want to invest in – long term or short term?
Long term or short term? Deciding on a type of investment property is a hard choice. But looking at the pros and cons of each type of property may give you a better decision tree to help you. Long-term rentals tend to remain consistent year over year since people tend to integrate into their communities. In doing so, they also have a vested interest in maintaining the property. Short-term rentals can be very lucrative, but have higher maintenance costs and can be very time consuming.
3. Learn how to value an investment property
Trying to gauge a property’s value in terms of what to pay for a property versus what will it make for you is a book unto itself. In fact, there are courses out there for real estate investors to learn how to underwrite a property. Underwriting a property is a very useful skill that will pay you dividends down the road.
4. Decide when to invest in real estate
With the flexibility of real estate in mind, when is the right time to invest? To that I would answer you: now. Yesterday was probably better, but tomorrow is going to make today yesterday.
If now is the best time to invest, how much should you invest? That depends on your risk tolerance and if you are simply looking to diversify, or if you are looking to grow your own portfolio and set your own course. Take stock of your finances, look at the market and consider your options, then educate yourself through podcasts, articles, blogs, and get-togethers with others in the real estate world.
5. Commit to SERVE
As property owners, we owe it to our tenants to provide solid, safe and healthy homes. It is our obligation to make repairs and be responsive to our tenants’ needs for their homes. That is why they pay rent, and keeping that in mind helps us all be better stewards of our community.
You will have some great days and some terrible days, but on the whole, the good outweighs the bad and in the end when you take stock of your investment, you will see just how powerful real estate can be – financially and personally.
This content is excerpted from my e-book, 5 Things to Do Before Investing in Real Estate. Download your free copy here.