There are so many questions that need answers before you even start your real estate investing business. Typically folks get all hung up on questions like these:
- What kind of real estate do I want to invest in?
- Where do I find homes to make offers on?
- What kind of marketing do I need to do?
- Which strategy should I choose?
Asking the Right Questions
It’s really important for you to ask the right questions before you start your real estate investing business. There is nothing worse than realizing one day you have built a successful business… that you absolutely hate owning; that you hate “showing up” for every day.
I would challenge anyone just starting out to go through this process a little bit differently than the typical investor does, and not just simply concentrate on the various strategies. There are a couple of questions I believe you need to ask yourself first. You need to get crystal clear on these answers and make some decisions right from the beginning.
- What are my skills and what are my strengths?
- What are my weaknesses?
- What do I really like to do?
- What do I hate doing?
And here is the most important question of all:
What kind of lifestyle do I ultimately want to create for myself?
You really have to give this some serious thought. If you want to travel, one of the really hands-on real estate investing strategies like rehabbing probably won’t work for your long term strategy.
Let’s say you want to be a buy and hold landlord to build long term wealth, but you hate talking on the phone and dealing with problems. You’d better plan on hiring a property manager right from the beginning or you are destined to be miserable. Matching your real estate investing strategy with your long term vision and the lifestyle you want to create will be really important when you are putting in long hours building your business.
Choosing Your Investing Strategy
Once you have taken a good look down the road into “your future” and decided on some lifestyle goals, then it’s time to look back at the first questions. It’s time to decide what where your strengths and weaknesses lie, and what you would really like to do.
- What can you do to fill in the gaps in your knowledge?
- Is there someone that can help you out in the areas you are weak?
- What are you passionate about?
- Can you turn this passion into a viable business? The answer may be no. The knowledge gap may just be too large right now.
Truth or Consequences
This is the time for some brutal honesty in your assessment.
If you grew up in a home where the family business was a small contracting business and you decide you want to be a rehabber that may not work if you never worked in that business. You might not have a single skill to help you out in those first months or years in your new business. Passion and hard work will be needed for sure, but it may not be enough when you are a real estate investing rookie.
If you grew up in a family of landlords, being a landlord yourself may be the last thing you want to think about. But it may also be the one strategy you know the most about. Does this mean you should be a buy and hold landlord? Not necessarily.
Here’s one thing you need to realize though:
“You may have to do some of what you don’t like to do in the beginning to make your long term strategy work out.” But I wouldn’t create a business you hate even if that is where your skill set and knowledge are.
Strategies and Your Skillset
Here are some more things to think about when you are making your assessment. Do I have the funds or credit available for the particular strategy I want to pursue?
If you want to be a buy and hold landlord but you have no way of getting a loan, that strategy will be off limits to you unless you can find a partner. I feel like a lot of real estate investors when I say that I personally wouldn’t want a partner for any long term strategy such as this one.
When it comes to rehabbing, you will need to have cash available if you decide to go down this path. I would say that it is much easier to find a partner for this type of investing strategy. In fact partnering with a seasoned investor gives someone that is new to this business a safety net. You can learn in a much safer environment. It’s a pretty safe bet that if you can put together a really good deal you will be able to find someone to partner with to rehab it. You will also be able to wholesale the house as an alternate strategy.
Do You Have A Marketing Plan? How Will You Get Leads?
No matter what your strategy, you will need to know how you are going to find those houses to make offers on. Every real estate investor needs to put together even a very basic plan for getting their phone to ring. Without leads you will have no deals. To put it another way, without leads you will be out of business pretty fast.
The next question is, “Do you have a marketing budget”? The answer must be yes on some level, even if that is a few reams of paper to put out fliers. Some strategies take a lot less money than others, but in almost all cases – you will need some cash.
Is There Anything I Can Do That Is Free?
Calling FISBO’s is free.
I know one gal that had absolutely no money when she started out, but that didn’t stop her. She took a deep breath and called FISBO’s every night after work. It wasn’t long until she had an appointment to look at her first house. That meeting with her very first motivated seller netted her about $15,000 which completely changed the course of her life. She had just made more money than she could make in her “JOB” working for many months. That was the moment she knew that she could do this business.
Do You Have What It Takes?
Only you can decide if this business will work for you. It takes a lot of hard work, often a lot of late nights, and an attitude of “I will do whatever it takes”. And as Marie Forlio says,
“Everything is figure-out-able”.
How did you choose your initial real estate investing strategy?