For many, real estate investing appears to be glamarous and lucrative work. Individuals may have dreams of purchasing a property on the cheap, quickly renovating it, and pocketing a substantial profit. While there is some truth in this perception — and real estate investing can be highly lucrative under certain circumstances — it’s certainly not easy, and takes some getting used to. There is simply much to consider, particularly for first-time investors.
With that in mind, here are three things all real estate investors should consider before attempting to join in the market.
1. Do You Know the Specifics of a Given Market?
You are almost certain to hit snags in your plans if you have not first developed a comprehensive understanding of local real estate conditions. Depending on the type of property in which you seek to invest, you should know average prices, property taxes, relevant zoning or permitting requirements, plans for future changes and developments, and more. Being able to assess not just the present of an investment — but its past and future — will help you build a base of knowledge that primes you for more substantial success down the road.
2. How Will You Pay For a Purchase?
Banks are often wary of lending to unexperienced real estate investors. But determining adequate means for sufficient funding is essential to having success in any investment.
You should make a plan to assess how much funding you realistically need for your specific goals, whatever they are. You should then work to seek out a multitude of lending options — banks, credit unions, SBA loans, private investors, crowdfunding, and more. It may be useful to speak with a financial or real estate professional, or a more experienced investor, to help at this stage.
3. What Are Your Long-Term Goals?
Having a plan that encompasses not just your immediate purchase but a more substantive arrangement down the line is essential for long-term success. Do you plan to build a reliable series of income streams from a commercial or multifamily property? Do you intend to quickly flip a residential property? Do you wish to leverage one purchase into a future loan that allows you to further expand your real estate business? These and other questions are necessary to determining the potential of a given investment.
These are only some of the questions that real estate investors must consider. While not comprehensive, if you’re looking to get into the real estate business, these sentiments above may help structure your plans.