Interest in real estate investing has exploded in recent years.
There are more house flipping and rehab shows currently on TV than at any previous time. You can find a house flipping program based anywhere from Las Vegas to Maine to Alaska almost every night of the week. If you are reading this, you have probably caught yourself watching one of these shows and thought that you can do what they do. On one hand, anybody can invest in real estate, but on the other, it is not as easy as it appears. The rehabbers you see on your favorite program have been in the business for years and worked on hundreds of properties. That being said, there is nothing stopping you, or anyone else, from making an offer and getting started.
Before you dive head first into the real estate business you need to assess if you really want to invest in real estate. Here are a few ways to determine if investing is for you:
What’s your goal?Real estate investing is a very broad topic. It covers wholesaling, tax lien purchases, commercial properties, buy and hold rentals, fix and flip deals…etc. The very first thing you need to assess is what you want out of the business. As popular as house flipping is it can also be time-consuming and risky. You need to find the right property, have a team in place to do the right work and find a willing buyer as quickly as possible. The upside potential is high but does not come without risk. If you do not have the time or desire to deal with the grind of a rehab, a rental property may be for you. This allows you to realize monthly cash flow all the while building potential equity appreciation. You will have to deal with tenant demands and maintenance requests, but if your goal is to add a long term addition to your portfolio you will accept theses hurdles. There is no right or wrong way to invest, only what you prefer. Your goals will help define which area of the business is best for you and which types of deals you should pursue.
What’s your risk tolerance?As we mentioned, your investing goals are usually influenced by your risk tolerance. All real estate investments carry some kind of risk. Generally speaking, the deals with the highest upside also have the highest risk. You need to figure out how much risk tolerance you have. If your risk tolerance is high, fix and flip rehab deals may be for you. If you are risk-averse, you may want to focus more on rental properties or wholesale deals. Contrary to what you may see on TV, investors can lose money. This percentage is small, but it does happen if you are reckless. Take this into consideration before investing into real estate.
How much time do you have? Technology has made it so almost anyone can invest at any time and practically anywhere. Instead of driving thirty minutes to see a property you can watch a video tour on your laptop. As much as technology has made the business easier, you still need to be able to dedicate some time. If you have been recently laid off, now can be the perfect time to get into the business without any restrictions. You will have enough time to perform the due diligence you need to ensure you pursue the best deals. If you have an office job where you can’t use a computer or talk on the phone you will be forced to find deals after hours or on weekends. This doesn’t mean you can’t invest in real estate, but your path will be more difficult. The time you can devote to the business will tell you which types of deals are for you and what markets you should be looking in.
Real estate investing can be a life-changing experience. If you are ready to dip your toe in the real estate waters you need to call your real estate agent and set up an appointment to discuss goals and strategy. Are you ready to start investing in real estate?