Real Estate Investing: Five Rules of Engagement

Sat, 26th June, 2010 - Posted by admin

Real Estate Investing: Five Rules of Engagement

Real Estate Investing

You may think that now is a terrible time to invest in real estate. You know that you stand to show a significant return in the long run, but phrases like “mortgage lending crisis”, “real estate market crash”, “economic downturn”, and “the bubble burst” have effectively scared you off. However, it is a business, like any other, and if you enter into it with a solid plan, armed with a set of knowledge and skills to help you, success is just a matter of time and effort. But there are a few things you need to consider before you get gung ho about buying homes.

1. Check yourself.

How do you know if you have a personality suited to real estate investment? You must possess several traits in order to succeed in this market, including being outgoing, personable, intuitive, assertive (even aggressive at times), tenacious, determined, and above all, hard-working. Excellent communication skills are a must and the ideal candidate will also boast an aptitude for math. If you don’t like dealing with people, you can’t handle stress, or you lack a strong will to succeed, you should probably consider another occupation.

2. Set goals and follow through.

Are you interested in flipping houses or renting? Answering this basic question could make a huge difference in how you approach your investment in real estate, from the purchase price to the number of properties you acquire to how much you’re willing to put into fixing them up. Of course, it could also determine how soon you see money coming in and the amount you stand to gain on your investment. Just remember that managing a rental property has its own unique set of challenges, so consider that before fantasizing about a renter covering the monthly mortgage.

3. Get educated.

There’s a lot more to buying a house than doing a walk-though and signing the paperwork. You need to be able to assess the ability of any property to turn a profit (based on condition, location, size, cost, and a number of other factors). Think about taking a course in real estate investing or management, or even going a step further and getting a license to help you really understand the business and the market. The information you gather is going to save you a lot of heartache (and money) down the road.

4. Know your mortgage.

There are many different types, so you don’t want to get stuck with one that doesn’t meet your needs. While this certainly falls under the aforementioned category of education, it is important enough to list on its own. Understanding how mortgages work is an absolute necessity if you don’t want to get yourself into serious financial straits with lenders over the long haul.

5. Count your cash.

Now is not the ideal time to get a loan, even if you have significant collateral, so you better have a big enough start-up fund to float you for awhile just in case you encounter issues that need to be addressed with the property, or you experience delays in selling or renting. If you’re approaching this as a viable business opportunity, you may even want to seek out other investors to pool funds. And you could certainly do worse than having an extra opinion to help you through those tough calls.