5 Crucial Questions to Ask Yourself BEFORE Becoming a Real Estate Investor

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If real estate investing were easy, everyone would be doing it.

You’ve likely heard this statement describing real estate or some other type of business or entrepreneurial effort. Concerning real estate investing as a part-time or full-time business to generate cash flow and/or large amounts of profit, it is particularly true.

Let’s face facts; many things have to be done between where you are currently in your real estate business and the future version of yourself where you’re well known by the community and creating substantial value in multiple real estate deals simultaneously. Becoming a successful real estate investor does not come without much time, energy, education and daily action.

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5 Crucial Questions to Ask Yourself BEFORE Becoming a Real Estate Investor

1. Do you follow through on things?

I love this question because it is a question that only we ourselves can truly answer. Keep in mind that if you lie on this question, you are only hurting yourself. The ability to follow through is crucial. Dreaming about being able to retire early or six-figure paydays may be fun; however, the effort required is immense, challenging and available to most folks who have enough ambition to consistently follow through until the goals are achieved, or a better plan realized.

Pro Tip: The opposite of people who follow through on things are people who like to get started on a project and then quit before completion. If this is you, then aim to complete small tasks in order to give you the courage and confidence to complete larger ones.

2. Are you incentivized by rewards?

While starting out, many real estate investors do not realize a profit for at least a few weeks or months after beginning to invest. In addition many of the daily actions and skills needed as a real estate investor require effort and discomfort as we grow into more competent investors. It is important to reward yourself. By using delayed gratification, you can encourage yourself to take daily action and push yourself to become an active and productive investor while keeping your reward/prize in the front of your mind.

Related: The 3 Most Important Questions Entrepreneurs Should Ask Themselves

Pro Tip: Create a list of goals with deadlines. Next to each goal, think of an appropriate reward or prize that you will buy for yourself or give to yourself once this goal is achieved. Lastly, double or triple each goal before you achieve this reward. Aim high in your goals; you can do it. Example: If you wish to speak with 10 sellers, your new goal is 30 in order to achieve the set reward.

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3. Do you know your opportunity cost?

As previously mentioned, becoming a competent and profitable real estate investor takes a good deal of time and daily effort. If you choose to take on the responsibility and burden of becoming a successful real estate investor, then you are eliminating free time to dedicate to other areas of your life or another side business, hobby or social group. Be prepared for early mornings and long nights, as well as stepping outside of your comfort zone on a daily basis.

Over the years I have seen many well-meaning folks underestimate the effort needed in their real estate investing businesses, only to receive little to no results. These folks are not lazy; however, they are not committed or focused in real estate currently. If you know that you do not have one hour or more of free time multiple days per week, then perhaps your time would be best spent with a more realistic and appropriate side business or hobby.

4. Do you have a social support system?

Be your own best cheerleader! Confidence is broken and businesses are sabotaged with negative thinking and negative emotions. Be certain to surround yourself with similarly thinking, highly motivated and positive real estate investors. Aim to read more self-help and business-related books.

More important than books to many of us are our own family members and friends. Oftentimes we know very well who is negative, un-motivating and weighing us down emotionally. Negative friends and family members can be an anchor keeping you from moving forward as quickly as you otherwise could without this influence in your life. Make certain to protect and prune your mental thoughts.

Here is a quick key to categorize your thoughts.

  • Thoughts and ideas which propel your real estate investing business and make you feel proud are good. Keep these.
  • Thoughts preventing, hurting, belittling or slowing down your real estate investing ability are bad. Ditch these thoughts and/or friends.

Pro Tip: Make sure to network with other real estate investors here on BiggerPockets. Join the Forums here to chat and ask questions daily. Join a handful of local real estate investment clubs by going to meet up sites to find a group of like-minded real estate investors near you.

5. What niche/focus makes you most happy?

It is important to be happy in life, and your real estate investing business is part of your life. Make sure you choose a niche that suits you best. Many of us already understand the importance of choosing a specialty while real estate investing. It is a rash and foolish real estate investor who aims to be an expert in every real estate specialty.

Here are some criteria to review while choosing your ideal niche:

  • Which local markets are highly competitive?
  • Which local niches in real estate are highly competitive?
  • Where locally are sellers in need of the most help?
  • How much available capital do you have to invest in a future real estate transaction?
  • How is your current credit worthiness?
  • After talking with multiple sellers, what help is required from an investor? (Investors create value so aim to help sellers.)

Pro Tip: Create a list of your top five ideal real estate niches. Over the next two weeks, aim to take out local investors in each niche to eat and discuss this type of investing. Become more educated than you currently are on the exact niches, then proceed to choose the top one or two niches you believe will accomplish your goals and make you happiest on a daily basis.

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Bonus #6: Do you like people?

This one may cause some debate. Indeed, with the help of the internet and real estate agents, you are able to purchase a piece of property without ever talking to a seller. Likewise, you are able to outsource repairs and resell a home without ever seeing it or meeting the new buyers. Even still, there are real estate investment companies that specialize in providing turnkey real estate investments to almost any buyer with cash or bank financing.

Related: 5 Questions Entrepreneurs Should Ask Before Making a Big Business Decision

However, for most real estate investors there is genuine joy and personal fulfillment in solving people’s problems by helping buyers and sellers locally. With nearly every real estate investor I meet, there is a good degree of social interaction happening between buyers, sellers and investors on a daily basis.

It can be very helpful for a real estate investor’s bottom line to be positive, helpful and disarming in his or her real estate business. If you do not enjoy working with people or socializing with people, then fear not. Simply adjust your tactics and realize there are (limited) ways to invest without working directly with the general public.

In conclusion, real estate investing is possible for nearly every reader not reading this from prison or their death beds. I say this past sentence to drive home the concept that real estate investing is possible for almost anyone with perseverance, dedication and daily discipline. This article is aimed to inspire you and push you beyond the limits of your personal best. Within a short radius around your home, there are likely buyers and sellers that are confused and really need your help. These sellers and buyers may not know who you are currently; however, this is a very solvable hurdle.

Investors: What questions would you add to my list?

Be sure to let me know with a comment!

About Author

John Fedro

John Fedro has been investing in manufactured housing since 2002. John now spends his time continuing to build his cash-flow business in multiple states while helping others enjoy the same freedom he has achieved. Find John here.

3 Comments

  1. Edward Briley

    The biggest problem I have seen is that “Investors” run out of money before they can benefit from their endeavor. Many of them try to sell the property, because they simply give up. Being an investor is not easy, rather you rent out properties, or flip them. I see flipping investors not understanding that you just cannot go into a home, put in new carpet and a paint job without fixing the major problems with the property. It does not take long before a home inspector or appraiser catches the problem, and this gives quality flippers a bad name.
    The first thing investors need to look at is their bank account.
    The second thing is to do your research on everything. You have to know the neighborhood, the neighbors, how many rentals are in the area, and what kind of rent you can get, or the resale value of the house when you have completed a flip.
    The third thing is to make sure you get a home inspected by a “good” home inspector.
    The forth thing to do is to get a termite and moisture inspection.
    The fifth thing to do is to make sure you have budgeted the correct amount of money to complete your endeavor. (I make sure I have at least 100% cash on hand that I budgeted before I buy an investment property- notice I said cash, not credit). If you don’t – move on cut your losses then, not later.
    Let me tell you about a property I know of. The home is worth less than 25% that was paid for it. The home has 3 bedrooms 2 baths. The owner of the home is trying to rent it for less money than rival properties are renting, even next door, but the home sits month after month without a tenant. They will get a tenant for a year or so and leave, even though the owners have done everything they could to keep them. Why? Agents cannot figure out the problem, and neither can anyone else. I don’t know why, and no one does. The only answer the realtors get is that the house does not show well. Why is this? It is because the home has a very narrow staircase going up stairs, and a very narrow and long room beside the living room.
    People down the street are renting a home that viewed this one. They could have rented this one, and saved two hundred a month. What I am trying to convey? That even though you may be thinking you are getting a good value, it may not be. You have to be able to afford an investment property before you buy it. You are going to need to make sure that you have enough income or savings to cover expenses when it is sitting empty. This includes utilities, taxes, upkeep and insurance. Even if you flip a home, at present, most homes will only give you a 10% or less return on investment. If you don’t believe that, at least leave enough margin for this return. Real estate investments normally increase in time. The key is to know when to jump in buying a property and knowing when to jump out. – Good luck if you are just starting, and make sure you are prepared for anything, because anything can and will happen. You must make sure you have the funds for anything to happen, even if it becomes a total loss.
    Profitable investors only get lucky because they have done their research, and are in the right place at the right time. – you have to put yourself in that position.
    Real Estate investment can and will be a money making endeavor, if you do your homework, do it correctly, have the patience and the money to follow through with it. It is not easy, and you will have worries everyday. Believe me. Real Estate investment is not for the faint of heart.

  2. Chas Phillips

    Another great article John,

    It is agreed that real estate investing is a demanding and often times stressful modality. However, it is also one of the best vehicles to achieve short and long term wealth in the shortest span of time.

    The time spent is well worth it when I look at the future that can be attained for not only myself but my family as well.

    • Edward Briley

      I am someone that believes no matter how or what you invest, some of it should be in Real Estate. Period. Buying a home is the most important thing a person should do. I don’t know a successful person who hasn’t.
      Buying a second or third property is even better. I see a lot people get in over their head trying to invest money into something they cannot afford, or do not have the patience to carry it through to the end to see a return on their investment. I just ask people to do their due diligence before deciding on buying an investment property, and make sure that property is for them.

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