Q: A recent impromptu discussion with an accomplished real estate investor has got me thinking about entering the market. Do you have any tips for first time investors?
A: No success is guaranteed in any investment, but at the same time becoming a successful real estate investor is much easier to do if you develop a sound plan and stick to it. Real estate, especially residential rental properties, are considered to be among the safest, most stable investments when done properly, and offer great long-term benefits to the investor who is prepared, patient and disciplined in their approach.
As with most great endeavours though, getting started is generally the biggest challenge of all. It is wise to be cautious when making your first investment, as it will play a significant factor in determining your success. One could fill volumes about how to find a solid investment property, and we’ll be sure to examine that in our next column, but first we should discuss how to prepare yourself for the exciting road that lies ahead.
My number one piece of advice to new real estate investors is to take your time. I have always been a firm believer that “haste makes waste”. A lot of first time investors buy a property because they believe they got a good deal and then try to figure out what to do with it. Such an approach is backwards. First determine your investment model, and then try to identify properties that match that model.
While moving swiftly is generally essential to securing a good price, this shouldn’t deter you from performing due diligence and being patient. Balancing these two impulses is a delicate art form, and constitutes the foundation of wise investing.
Among the best ways to avoid making a hasty decision is to keep emotion out of the process. Remember that there is always another investment property. However great an opportunity may be, even if it passes you by, the next one is always just around the corner, both figuratively and literally.
I also strongly suggest you take some time to develop and nurture relationships. They are the lifeblood of successful long-term investing in any forum, not just real estate. Experienced investors or advisors might be an ideal source of information. Offer to pay for an hour or two of their time, and don’t be shy to ask for advice or guidance.
The point is, whether it’s a relationship with a mortgage broker, a tradesperson, a reputable agent, or a prominent builder, being in a position to get accurate and unbiased insights as to what is actually happening in today’s marketplace will prove priceless as you get ready to make your move.
I can’t emphasize enough the importance of having sound tax advice. A relationship with an accountant who has knowledge in handling real estate investment portfolios is an invaluable asset. Being kept abreast of the dizzying array of laws and regulations, as well as options for deductions and write-offs, is critical to achieving a healthy and firm profit margin, and to maximizing your opportunity. A good accountant should also help to ensure you don’t overextend yourself.
The bottom line is to make sure you do your homework. You wouldn’t think you’re qualified to perform brain surgery without years of thorough education, yet many aspiring real-estate investors don’t think twice about taking their financial lives in their hands without even cracking a book. Educate yourself before you put your financial future on the line. Read books and articles, surf the web. Research every aspect of the process. Don’t just read the success stories. Look for articles that highlight the common pitfalls that first time investors encounter.
If you are at all serious about real estate investing, you should build your plan on a solid foundation of information and understanding. Skimping on any of these details can make your experience in these exciting investments unnecessarily challenging.
Hope this helps.
