What It Takes To Become a Successful Real Estate Investor
Real estate investing is not rocket science. All it really requires is a determined individual who is willing to take the time and learn the business. Real estate investing does not require large sums of money, inside contacts, or a magic touch. All that is really necessary is knowledge and that is what you will find in the pages of this book.
Tips and Secrets for Real Estate Investing was written with the aspiring real estate entrepreneur in mind. This book is designed to provide you with a no-nonsense approach to real estate investing. Everything you read is of importance and has found its way onto these pages for a specific reason. What you will not find in this book is wordy explanations and complicated information that simply waste your time. We all know that time is money, and I am here to help you make money, not waste it.
With that said, let's return to the original statement of this introduction, real estate investing is not rocket science. I assure you that as long as you have a will, there is a way. Sure, investing isn't for everyone, but you are not like everyone else. You have an objective and you are searching for a way to obtain it. This factor alone separates you from the rest of the crowd. In other words, if you are reading this, it is proof that you are motivated.
In addition, it is crucial that you have the ability to make decisions. I know this sounds simple, but for some people, decision making is a difficult task. There may be times that you must make difficult decisions. If you are unable to do so, then maybe this isn't the investment opportunity for you.
There are several traits in a person that can make investing easier. For example, it is helpful if you are organized, computer savvy, and a people person. But none of these things are required of you. Therefore, your first step toward successful real estate investing should begin by studying this book. The more you know and the better you understand the real estate market, the more likely you are to be successful in it. So, what does it take to become a successful real estate investor? Knowledge and the ability to make decisions, it is as simple as that.
Why Invest in Real Estate?
Without argument, there are plenty of ways to turn a profit in today's economy. So what makes real estate the right option? There are several answers to this question. However, for the purpose of this book, we will focus on one primary answer. Real estate investing consistently offers a better return on your money than other traditional forms of investing such as stocks, savings certificates, commodities, life insurance policies, consumer merchandise, and bonds. Property is extremely versatile. Most pieces of real estate come with a handful of options or different ways to generate a profit. Not only that, but real estate is almost always appreciating, and when it is not, you can use that to your benefit.
Now don't get me wrong, there are plenty of disadvantages and advantages associated with investing in property. Let's take a closer look at those factors before moving on.
The Advantages of Real Estate Investing
High Returns
As previously mentioned above, one of the major advantages that come with investing in real estate is the prospect for high yields. It is not uncommon to see a profit average of 20 percent when investing in a piece of property. In fact, depending on the market, it is possible to experience an even higher yield.
High Leveraging Opportunities
Real estate investing offers the investor the best leveraging opportunities. For example, the cash requirements are not the same as they are with other investing alternatives like stocks and bonds that require the purchaser to borrow 50 percent of the value of the securities. In real estate, it is more common to invest between 20 and 40 percent of the value of the property. Furthermore, based on the market and particular situation, it is possible to invest with as little as five percent down.
Flexibility with Income Tax
Who doesn't appreciate flexibility when it comes to income tax? When investing in real estate, the investor enjoys certain allowances and deductibles. Most notably, common expenses such as insurance premiums, property taxes, management fees, maintenance feeds, and other operating costs can effectively reduce your taxable income.
Personal Control
Not all investing opportunities are created equal. When putting money into real estate, the investor is able to appreciate a higher level of personal control than when investing in alternative options. Each purchase can be crafted to fit the current situation and property. Property can be refinanced, terms can be adjusted, and investors can rent or sell. Essentially these details are left to the investor. Therefore, the investor gets to decide when and how to move forward with the investment. Maybe it's not a good time to sell. The investor can opt to rent instead. There are several examples, but the point is, when you invest in real estate, you reserve the right to invest and sell under your own terms as determined by what personally and economically satisfies you.
The Disadvantages of Real Estate Investing
Unpredictable Liquidity
Buying real estate is usually fairly easy. Sometimes it is harder to find a sound investment, but overall there are always houses or property for sale. The downfall to real estate is you never know how liquid your asset will be. This is because the market greatly affects and is greatly affected by the overall economy. If the economy is in a slump and lenders are not approving loans, it may be harder to sell a house than say during the housing boom in and around 2006.
With that said, you don't have to sell your property to make a return on your investment. In fact, there are several ways to earn a profit aside from selling or flipping a house. We will review these methods in full detail shortly. For now, just know that by preparing for the worst, you can overcome the challenge of unpredictable liquidity. Remember, in the long run, investing in real estate is still your best shot at a higher return on your money. You need only know what you face going into the situation.
Capital Requirements
Another primary disadvantage to real estate investing can be attributed to poor liquidity. Depending on the investment, you may be required to come up with a large amount of capital to put down. This very factor makes it difficult for consumers to purchase property and thus makes your investment hard to liquidate. The good news is I will share with you my techniques on how to avoid the need for a large amount of capital when investing. You will find this information in an upcoming chapter.
Risk
More than likely you already know that in order to make a big game, you must be willing to accept a certain amount of risk. Like all investments worth your while, real estate has some associated risk.
It is important that you take a moment and reflect on this fact. Real estate investing is not risk free. While there is potential to earn a great deal of money, there is also the chance that you will lose money.
It is for this very reason you need to educate yourself on the market and investing techniques before diving in. It is also for this reason that you need to be an accomplished decision maker. If you can't evaluate the situation and make an educated, fast decision, your risk of failure increases.
The market is volatile and heavily dependent on numerous factors. While there are many things you can control as an investor, you have no say in the fluctuation of interest rates and how they respond to laws of supply and demand. At any given moment everything is up in the air. Risk is not be downplayed. Know it, understand it, accept it, if not, it's time to move on.
The Art of Landlording
Ask just about any landlord and he or she will tell you, it's no easy job. When you invest in real estate, you almost always run into a situation that requires you to become personally involved with the tenant or manager. How you handle landlordism will depend primarily on your interpersonal skills and the other individuals you interact with.
Being a landlord can be time consuming and emotionally taxing. While it is possible to have pleasant relationships with your tenants, it is just as possible to have the opposite. In fact, landlording is a major deterring factor for some potential investors. It is simply too much hassle. Your feelings on this topic should be taken into consideration when looking into investing. If you have an opportunity that requires landlord duties, perhaps that is not the investment for you. Either way, always make sure to keep this in mind.
Management and Maintenance
Another downfall to investing in property is the requirement for near constant management and maintenance. Investing in real estate is a busy business. You have to keep up on everyday living expenses such as the cost for a new roof, electrical repairs, plumbing expenses, etc. In order to get a sound return on your investment, you may need to enhance or upgrade your property. Management and maintenance can be a major burden, especially if you didn't invest in a sound project.
As an investor, you may also need to hone your handyman skills. From driving nails to patching holes, your role hat will increase significantly. Most real estate investors are hands on. There presence is required for the upkeep and successful sale of the property.
Summary
In summary, real estate investing is not for the faint of heart. To become a successful investor, one must boast a certain amount of determination and take the steps needed to become educated on the topic. With the right amount of knowledge and understanding, anyone can thrive at investing.
Real estate investing is a popular form of investment because it offers a high return on the investment. In addition, investing in property is a flexible venture that leaves the investor in charge 90 percent of the time. Lastly, investors enjoy certain tax breaks associated with operating costs that help reduce their taxable income and thus reduce the amount of income tax they must pay.
Real estate investing also has a down side, most notably, there is a certain amount of risk that comes with investing in property. This is because there are factors that are out of your control including the health of the economy, interest rates, and supply and demand. Additionally investing can sometimes call for a large amount of capital. This can be difficult if you don't have a healthy cash flow. When you invest in real estate, you may be required to personally assist with the management and maintenance of your investment. This means your hands are going to get dirty. Finally, investors often find themselves playing the role of landlord. This position requires keen interpersonal skills and patience. If you aren't interested in interacting with tenants, landlording is not usually a good investment option.
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