5 Things I've Learned from Savvy Real Estate Investors.
Updated: May 2
I have had the opportunity to work with many Real Estate investors on both sides of the sale. I have learned that investing in Real Estate can be lucrative, but it can also be risky. It takes creativity, dedication, and a bit of savvy to become a successful Real Estate investor. I have worked with all types of investors; full time investors, people who have inherited properties, and people who have owned properties for 50+ years.
Here are 5 Things I have learned from savvy Real Estate investors.
1. Understand Your Market Smart investors truly understand the local market. Keeping up with small pockets and neighborhoods puts you in a better position to understand and predict what may happen in the future. Understanding market trends does not just mean knowing the location of the new Restaurant coming to town - it means understanding local politics, zoning laws, unemployment rates, rental vacancies’, etc. You need to be an expert in your area. I have worked with investors who have owned multiple properties on the same street because they knew the area so well. Having your properties in close proximity to each other also helps when it comes to maintaining the property; Example: You can plow all 3 driveways quickly, as opposed to driving to Haverhill, Worcester, and back to Beverly.
2. Treat this like a Business, even if this isn’t your Business Many investors I work with have full time jobs, and that is totally fine! That's the beauty of Real Estate investing, it makes your money work for you. But, this doesn’t mean you should just throw your money around. Make a business plan - create a Net Operating Income spreadsheet to make sure this investment makes sense financially. Ask yourself "will this investment work with different scenarios?" Maybe you can’t plan for a worldwide pandemic, but you should do the math in order to determine whether or not you can afford to have empty rentals during an economic downturn.
3. Talk with Everyone and learn Everyone should know that you are in the Real Estate game. I met one of my best clients sitting at the bar at Finz in Salem. After our first meeting, we did 6 deals together, including his $2,000,000 waterfront property. You never know where your next opportunity will come from! Often times, successful Real Estate deals are serendipitous. *Even the most successful investors continue to learn. I've learned that they love to talk about their portfolio and are willing to share tips on strategies they use to obtain new deals.
4. Understand it is not all upside Do not believe that Real Estate investing does not come with some risk. This is not a get rich quick plan. Real Estate investing (like any investing) comes with risk and potential downside. Do the math, and think about the worst-case scenario. Can you afford a few months with no rent? What if the market turns? Can you afford to hold longer?
5. Create a Team of Experts Yes, I think working with a local Realtor is a good idea, but of course I do, I am one! But, you should create a team in order to have the best experience during the buying process and as a landlord. Particularly, having a good Real Estate lawyer, accountant, and general contractor are extremely important to success. There are many Real Estate laws and tax codes that you would only know from lots of research - or from working with a professional. I have learned so much over my years in Real Estate, but I still turn to lawyers and accountants for help on complicated deals. Often times, understanding the tax codes can make the difference between a profitable deal, and a money loser.