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5 Questions to Consider Before Jumping Into The Real Estate Business


real estate investing

Are you thinking about investing in real estate?

If you are reading this you are off to a great start. However now is when the real work begins.  You can’t just dive right in and make offers on every new property you see.  You need to think about investing in real estate like running a business.  With that there are a few important questions you need to ask yourself before you get too far.  How you answer these questions will determine how you invest and the markets you invest in.  They will shape where leads will come from and how you structure the deals that come your way.  It is great to be excited and eager to get started but before you get too far you need to answer five critical business questions.

  • Do I Need A Partner? A good business partner can take your business to another level. On the flip side a poor partner can drag it down and become a burden to deal with every day. One of the first questions you should ask is whether or not you want to start by working with a partner. A partner should bring something to the table that fills a void in your business. This could be anything from capital to contacts. They may bring handyman experience that can help with your rehab projects. They may be able to manage any rental properties you acquire. Whatever the skill set is it should be different than yours. Two partners who are similar usually end up butting heads and don’t form an effective partnership. You can always partner up with someone down the road if the opportunity presents itself. Never jump into a partnership unless you know exactly what you are getting into.
  • Who Do I Want To Work With? Even though real estate is usually an individual endeavor it takes a solid team to have success. There are many people who you need to reach out to before, during and after you find a new deal. Start by forming a relationship with a real estate agent. You don’t have to work with the most experienced or successful agent in your market. As long as they know what you are trying to do and can help find deals experience isn’t a necessity. From there you should look for either a property manager or contractor depending on the type of properties you invest in. This is especially important if you lack experience with home improvements and upgrades. You also need to find a real estate attorney to help close any deals you have and help protect your business. A good attorney will pick up items on title or language on the contract before they become potential issues. There are also mortgage brokers, accountants and wholesale lead providers that you should reach out to as you are getting started. The stronger your team is the more successful you will be.
  • How Do I Plan To Generate Leads? You can have all the motivation to get started but unless you have deals to work on it won’t make a difference. There are more marketing options today than ever before. With the growth of social media you don’t need to break the bank to promote your company. However you plan on finding deals you need to start with a budget. Your budget will determine if you can do a large scale direct mail campaign or you need to start on Craigslist and social media. You should have a specific strategy in mind and how you plan to implement it. Businesses are constantly changing their marketing looking for the right plan. What you start with may change in a few months but you need to be able to generate leads to give your business a jumpstart.
  • What Do I Want From Real Estate Investing? What type of investing do you plan on doing? Do you want to buy a few rental properties a year or are you looking to rehab a property every month? How you answer these questions will determine the type of property you will look for, the budget and the location. Not every property makes a good rental property just like not every rental property is a good rehab candidate. You should have a clear vision of your goals to pass along to your real estate agent. A good agent will be able to match your goals to what is available in the market. If there is a lack of inventory you may need to shift your strategy or look in a different market.
  • Do I Have Reserve Capital? Even if you drop everything and start looking for real estate today the odds are you won’t see a check for at least sixty days. A more realistic scenario is that you may go ninety days or longer without generating income. Do you have enough personal capital to brace for this? This is an important, and often overlooked, aspect of investing in real estate. Without ample reserves it changes the way you view the business. You may make short term decisions that you know aren’t in your best interests. It will cause you to stress out with your family and maybe snap at your children. A common solution to this is staying at your full time job until your pipeline is full. There are many investors who maintain their employment and look for deals on nights, weekends and any spare work time they have. However you decide to do it you should plan on not generating income for at least the first few months.

You can probably make a list of twenty important questions to consider before you close your first deal. Investing in real estate is a business and if you think about it in that regard you will be much more successful.

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