9 Tips for Getting Started in Real Estate Investing
By Rebecca McLean, Executive Director, National REIA
Are you new to real estate investing, or just looking to step up your efforts? The following tips might help improve your focus.
1. Treat real estate investing as a business
One of the biggest mistakes I see new investors make is to treat real estate investing as a hobby instead of a profession. If you’re counting on real estate investing to provide income now and retirement income later you must treat it like a business. Real estate investing is now your profession. Treat it like one.
Advertise, devote time to it, show up for appointments on time, act professionally, do your paperwork properly and treat your clients professionally.
This is not a get-rich-quick scheme. It takes time to build client lists and credibility, partnerships and associations. A well-grounded business is built over time unlike “overnight sensations.”
2. Learn about the business and stay informed
“If you think education is expensive, try ignorance.” – Former Harvard University President Derek Bok
You can lose more money making a mistake than you can learning how to avoid one. Even if you have been at this business for years, you need to keep up with current trends and laws.
Some investors honestly believe that there is nothing else that they really need to know to be successful, then a law changes, the market turns, or a new strategy begins to be used. They either miss changes coming in their community that will affect their profits, put themselves in a position of liability, or miss out on time- and money-saving tips because they just didn’t take time to stay informed.
In the real estate business, like everywhere else, knowledge is power and for investors it’s profit too.
3. There are many profitable strategies in real estate
Most new investors get into real estate investing after hearing about one specific strategy. They have a friend or family member that has participated in real estate investing, they saw a TV show or infomercial or they went to their first REIA meeting and heard a speaker that made them want to pursue a specific investing strategy.
After a new investor has any success with one strategy they often develop the idea that other strategies are less profitable, more difficult to execute, and generally inferior to the one they are using. Suddenly they develop a certainty that their particular strategy is the supreme strategy so there is no reason to even consider anything else.
Following one particular strategy can be extremely valuable for the overwhelmed new investor since it allows him to really learn how a particular technique works. The downside of being so narrowly focused is that it limits the new investor’s opportunities.
Don’t get so stuck in a mindset that you can’t see good investment opportunities if they are out of your comfort zone. That being said, you can’t try to participate in a dozen strategies at once…see number 4.
4. Have a plan
All businesses need a game plan. You can’t just wander aimlessly hoping to find an investment. You also can’t rent an office, decorate it and then sit behind your desk waiting for the phone to ring. It just doesn’t happen that way. You need to decide upon a strategy, learn what you need to do, set your goals and make it happen!
Have a plan. Pass out 50 business cards a week (or whatever goal you decide is appropriate). Talk to 50 people by phone, spend $100 a month on advertising – set your goal, make it happen every single week – day in and day out.
5. Surround yourself with like-minded people
Real estate investing can be “creative” and a bit non-traditional, which means that this profession won’t appear on the Forbes top 100 professions list. Because those working in real estate often do so by working for a corporation or as a Realtor, investing as an independent isn’t a mainstream career choice.
Consider joining a local real estate association. These associations will help you keep your thoughts in the right place and prove to you that investing with a plan really can work. You will be connected to investors who can share what they learned from their unsuccessful deals/investments, and to those like you who are just starting in the business.
6. Be persistent
Anyone who’s ever been in sales will tell you that being persistent is the key to success. Just because a person says “No” to an offer the first time doesn’t mean that’s the final answer. Waiting a couple of weeks and checking back to see if the situation has changed can make all the difference, or changing the terms of the offer slightly to accommodate the seller can jump-start real estate negotiations.
Few investment are ever made on the first try. Have a good follow-up system for tracking contacts, leads and conversations you’ve had with both buyers and sellers. You’ll get to the point where you’re so busy you can’t possibly remember all the conversations you’ve had with everyone – it’s important to be able to pull up that information so you know where you are in the negotiation process. There are apps and/or software that can help you with this and it doesn’t matter which one you use, as long as you use it.
7. Have a team on your side
Don’t wait until you have an investment pending and need to ask questions before assembling a team you can turn to. You need to go out and cultivate relationships with reliable professionals you can depend on.
Here’s who to consider having on your team:
- Attorney – preferably someone who’s familiar with the needs of a real estate professional.
- Insurance agent – you need one who also understands your strategy and investors in general. Make sure the insurance products they sell are right for investors. We have needs that are far different than your average home owner.
- CPA or accountant – find one that’s a real estate investor. You could potentially lose thousands of dollars in deductions and tax breaks without a professional who knows the most up to date tax law as it applies specifically for investors.
- Contractor – you need a reliable professional that shows up on time, completes the job within budget and knows how to make suggestions that will save you money.
- Mortgage broker, private money lender, hard money lender or other money professional – find one that’s experienced with investors, knowledgeable and creative.
- Mentor – someone with experience and who understands real estate investing.
- Title or escrow company – find one that caters to investors. Make sure they understand double closings, land contracts, etc.
Your local real estate groups may be able to assist you in building your team of professionals.
8. Don’t waste time with unmotivated sellers
This is possibly the most common mistake new investors make. Some beginning investors waste time talking to sellers who are only marginally motivated. Even worse, they drive by the house and look for comps without even talking to the seller first.
There’s a difference between being persistent with a seller or buyer who hasn’t yet made up their mind about what they want to do and dealing with a seller who really has no intention of selling anytime in the near future. Don’t waste your time if the seller falls into the latter group.
9. Never forget that real estate is really about people
In the end, real estate isn’t about the land, the house, or even the money. On a practical note and an altruistic note, it really is all about the people.
Many investors make offer after offer, receiving rejection after rejection, never bothering to ask the seller what they want, assuming they already know. Making offers on the properties because you think you understand the value is far less effective and far less profitable than making an offer that provides the seller an option they didn’t know existed, a solution to their problem.
The moral of the story: if you listen, and I mean REALLY listen, and try to solve the seller’s problem you will likely make more money than if you try to just apply your cookie cutter approach.
Zig Ziglar used to say, “You will get all you want in life, if you help enough other people get what they want.” This business, at its core, is about people. We provide housing, we provide solutions, and sometimes most importantly, we provide options they didn’t know were available.
Rebecca McLean is Executive Director of the National Real Estate Investors Association.