Three Steps to Success in Real Estate Investing

Unfortunately, many people never get started with real estate investing. Some people really appreciate what real estate can do for them, but they get stuck and never start. Here are some excuses that people give for not investing in real estate:

  1. The proverbial fear of being called at night to fix a leaky toilet
  2. The fear of having a vacant unit while still needing to pay the mortgage
  3. Analysis Paralysis – constantly analyzing deals and never actually getting a deal done
  4. Not having enough capital to invest in real estate
  5. Illiquidity of the real estate

The list of excuses can go on, but the aforementioned excuses tend to be the most prominent ones that people give. At this point you should have come to appreciate the power of investing in income-generating real estate,

the most multi-dimensional asset class, EVER. Should you need a little more convincing, look at these six reasons why you should seriously consider investing in real estate.

As you read on, we hope to help you (buy-and-hold investor) overcome these excuses and get you closer to start (or to continue) investing in real estate. These suggestions are just that – suggestions and are in no way a one-size-fit-all solution but keep an open mind and explore how you can overcome your excuses:

  1. Educate Yourself:

This is the most important step in your real estate journey. The amount of information readily available on the internet ensures that you can get all relevant education you need on your real estate journey.

Historically, people paid thousands of dollars to gurus to learn about real estate investing. These gurus made so much money from selling materials and education more than they made in real estate. That game has completely changed, and the field is now leveled just based on the amount of knowledge available online.

Podcast is another avenue to educate yourself. There are several podcasts out there that you can benefit from – search on iTunes for “real estate investing”. Podcasts change the real estate game – education at your fingertips!

  1. Do Your Analysis Right:

This becomes second-nature to you after proper education. The real estate investing equation is fundamentally SIMPLE: Revenues minus

Expenses greater than zero. What can get people in trouble is when all the applicable expenses are not properly accounted for.

Revenues: Revenue is every form of income that is generated from the property – rent, pet rent, storage fees, laundry revenues, parking space fees, etc. Every form of income that is generated should go in to the revenue bucket.Expenses: People typically account for primary expenses – principal, interest, taxes, insurance and HOA dues. Most mistakes are however made on secondary expenses – vacancy, management fees, maintenance fees and capital reserves. Knowing the right amounts or proportions to allocate for these additional expenses is dependent on your local market – do due diligence to account for these expenses.

I recommend investing in a deal (particularly as a newbie) only if the cash flow from the equation above is positive. There are other factors that can still make investing in a negative cash-flowing deal worth the effort, but this dives into the realm of speculation (gambling) – and not recommended for a newbie investor.

One caveat here is to not get stuck in analysis paralysis – analyzing deals to a point where you never actually invest in deals. Experience as they say is the best teacher. You must go out and invest. You may make mistakes but, you’ll at least have learnt a ton. You can however minimize the impact of the mistakes you make by following step 3 below.

  1. Get a Mentor:This is perhaps the second most important step on your journey to being a successful real estate investor. You need someone who knows what they are doing and have at least accomplished the goal you are trying to reach.
  2. You need to be strategic in the way you approach a mentor. Your mentor will obviously be a busy individual, so you must approach him / her with something of value. To get the best of your relationship with your mentor, try to see things from their perspective as you ask them to do things for you. This will go a long way in expediting your real estate success story.
  3. Do you agree or disagree? Share your thoughts and comments below.
  4. You don’t have to be great to start, but you must start to be great!

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