If you’re thinking about investing in real estate, stop right now and read this. It’s important to have an understanding of what you’re getting yourself into before you get started. So, prior to any significant investments in time or money, there are 3 things you’ll need to consider.
1. You Need to Know Why You Are Investing
What seems like a simple question is often one of the hardest to answer. Why are you investing? What is your goal?
Your why may be that you’re looking for more time with family, or for travelling, maybe your sights are set on financial freedom, or doing more charity work, or maybe it’s having the flexibility to do whatever hobby it is you enjoy, more often.
Knowing your “why” has two main advantages.
The first is that it can help you figure out what investment strategy works best for you. If you’re looking for your investment to give you more time for family or travelling, then you likely aren’t looking for an overly hands-on investment. However, if your primary goal is financial freedom and seeing max profits, you may be open to putting more time and energy into your real estate investments.
The same is true for short-term investing goals where you’re hoping to free up quick cash flow, for goals that require shorter-term investments, as opposed to long-term goals for investing for the future. With real estate, you’re not going to get rich overnight, but different strategies certainly work better over different periods of time. Knowing the time frame in which you hope to obtain/achieve your goal will help determine the plan that’ll work best for you.
Further to that, considering which property type will best satisfy the time frame in which you hope to start accessing funds from your investment will come into play. There are a number of property types out there including traditional rental properties, student housing, multi-family dwellings, apartment buildings, commercial space, etc. You can flip properties, or even invest in developments. Knowing your goal will go a long way to putting you on the right path.
The second significant benefit from having a clear reason for investing in real estate is that it provides motivation throughout the investment process. While this may not seem as important when starting out, it can help keep you focused and on track as you get further into the process.
When you’ve successfully invested in multiple properties, you can start to lose focus, focus that is important if you are going to reach your goal. It will help you continue moving forward, and give you drive when faced with challenges.
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2. You Need to Know Your Financial Options
Many people look to real estate for both short term and long term gain. However, the desire alone to invest in real estate doesn’t automatically qualify you to invest your time and money into the market.
Before you go out and start looking at properties, go to a financing expert who has experience dealing specifically in real estate investing. There are a lot of financial details that you will need clarification. How much you can spend, how many mortgages you can qualify for, what your down payment will need to be? These are all answers that help drive decisions with your investing portfolio and serve to set realistic goals.
Will your first purchase affect your ability to invest in future properties?
Do you need to change/improve anything in your financial profile to help you qualify for better terms?
You may find out that because of your current financial situation you’re unable to make the kind of investment that aligns with your goal. However, you can put together a strategy to get in a better position to invest in the future. It is better to have an understanding of the financial side of your investment before getting too far. That way you know what you’re working with and how to proceed so you can ultimately reach your goal.
3. You Need to Know To Continuously Learn
There’s a learning curve to every new thing you do, and real estate investing is no different. In fact, it is a continually evolving world that will require you to learn as long as you’re an investor.
Empower yourself by educating yourself. Research, gather, and read whatever information you can get your hands on (books, articles, blog posts, etc.) to grow as an investor. Listen and talk with people who have more experience than you in real estate investing. Attend seminars and classes that focus on real estate investing and motivate you to achieve your goals.
It’s good to have a broad knowledge, but you’ll need to get specific. Seek out ways to further your knowledge so you can continue to improve your investing strategy.
Finding a coach that will help guide you is an excellent resource, and one of the first things you’ll want to have when starting. Get yourself a mentor who has done what you want to do. Learn from them.
Be open to continual learning.
No matter how much knowledge and skill you have, there is always something new to learn, which in turn, could improve your methods, returns, business relationships, etc. Even when you’ve been investing for years, you may find a new and better way to market your investments, or find an entirely new investment approach that better suits your goal. When you’re open to learning, you’re on the right path to being a successful investor.
Knowledge is power. Empower yourself.
Real estate can be a great investment platform, but proper preparation is key to success. If you’re serious about investing in real estate, ask yourself why. Once you know why, get your finances sorted, after that, never stop learning.