I love investing in rental properties, but it is not for everyone. It takes a lot of hard work, time and sometimes money to invest in rental properties. The truth is that getting started investing in rental properties is hard. It is not a get rich quick scheme; it takes a lot of effort and determination to be a successful investor. However, I think it is great that investing in rental properties is difficult, because the less people who do invest, the more money you can make on rental properties. This article is going to discuss what you need have to become a great investor. You don’t have to be a genius or rich, but you have to be willing to work hard and stick to it.
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Why invest in rental properties if it is hard?
I am making over 20% cash on cash returns by investing in rental property and that does not include any appreciation, equity pay down or tax advantages. It is hard to find another investment that has those returns, and that is why I chose real estate to invest in. Because investing in rental properties is hard, very few people actually do it. I would estimate about 2% of those who set out to invest in rental properties actually end up investing for a significant period of time. I don’t want to scare you off, but it will take work and time to become a great investor. Once you have figured out your niche and have some experience in purchasing rental properties it will get much easier. Rental properties have been so good to me that my goal is to purchase 100 rental properties in the next 10 years.
Are you interested in real estate investing and rental properties?
Everyone reading this lives in or on some type of real estate. I would think most of you are interested in real estate, but some people could care less and are just in it for the money. I love houses, love architecture and love fixing up properties (my contractor does the work). I think it is important that people are excited and interested in what they invest in. If you don’t care about a stock or a mutual fund, you probably aren’t going to do much research or spend much time looking into the financial data on that investment. When investing in rental properties, a lot of due diligence is needed to ensure a good investment. If you don’t care about houses and are just in it for the money, you may not do as well as others who love the business. Even if you are just in it for the money, that doesn’t mean you can’t be successful and shouldn’t learn how to invest in rental properties.
Do you have the right attitude to invest in rental properties?
Many people fear any change or starting a new venture. I think it is perfectly normal to be nervous or apprehensive about beginning something as major as investing in rental properties. If you let fear get the best of you and start thinking there is no way you can succeed, you probably won’t succeed. Our mind has a funny way of helping us succeed or fail depending on how we feel. If we are positive about our chances and believe we can do something, we will be more likely to succeed.
“Whether you think you can or think you can’t, you are right”
It is easy to let others convince us our goals and dreams are not possible or flawed. We tend to listen to them even though we have more knowledge and experience on the subject. We let our minds convince us the naysayers must know something we don’t know, and if we embark on this new adventure it will lead to ruin. Don’t listen to them! Be confident in your ambitions and future. They would probably love to be starting something new and exciting, but are too scared to do it themselves.
I am not against gaining knowledge and education, I will sit and listen to experts talk about real estate all day long. If someone thinks rental properties are a bad investment because they knew someone who once lost money on a property, I will politely ignore everything they are saying.
Are you willing to learn about rental properties and change?
I have been in the real estate my whole life, my dad has been an agent since 1978 and I have helped him since I was 3. Yet I still learn new things about real estate all the time. In fact I have leaned a ton by writing and researching for this blog. I thought I was an expert on investing and knew just about everything, before I started InvestFourMore. I was wrong. There is so much to learn and do in so many facets of real estate. You don’t have to learn everything all at once, just be willing to learn new ideas and accept that your preconceived notions about real estate may not be true. If you are willing to learn about rental properties and investing, real estate is an awesome opportunity.
Are you disciplined enough to invest in rental properties?
It takes money, time and patience to invest in rental property. If you aren’t willing to do what it takes to get funding, find properties and choose a good team, then investing in rental properties may not be for you. If you don’t have a lot of money to invest right away, you may have to make changes to your lifestyle. You may have to start a budget, cut down on some expenditures or find ways to make more money. I personally like finding ways to make money, because I hate budgeting and cutting back! It usually takes a long time to make your first purchase, don’t get discouraged. If you tend to give up easy, you may not be able to last long enough to make it in real estate. Once you make your first purchase it all becomes easier and everything starts to fall into place.
The key to any successful real estate strategy is to purchase properties below market. It is relatively easy to buy homes actively for sale on MLS for market value. The difficult part is finding the great deal, acting fast and getting it under contract. Finding motivated sellers that do not have their homes listed on MLS is a great way to find deals, but takes a lot of work and patience as well.
If you can’t imagine how you will ever get enough money to start investing check out my article on how to purchase your first rental without a huge down payment.
Do you have enough time to invest in rental properties?
You’re going to have to have some spare time to invest in rental property. You’re going to have to research your plan, look at houses, manage the repairs, rent your houses or find a property manager. If you are constantly busy and never have enough time now, think about if you have the time to add something more on your plate. If you don’t think you have time in your life for something new, maybe you are too busy! Your first step may be to increase the amount of spare time in your life. I am constantly working on gaining more free time and I am working on a time budget now. I take all the hours in the week and allocate time for sleep, work, leisure, family etc. Looking at where you spend your time now is a great way to decide if your priorities are in the right place. Here is a great article on how to manage your time better.
Focus is a great way to instantly increase time. I am horrible at trying to do too many things at once. Ultimately it takes me longer to complete my tasks, I make more mistakes and forget what I am doing when I try to multi-task all the time. It is really hard for me, but I when start a task now, I focus on it until I am done with it or I have spent a certain amount of time on the task. I don’t check email, browse the internet or do anything else until I am finished with that task.
Hiring help is a great way to increase time and usually increases your results as well. Whenever I hire a new assistant and can delegate tasks I don’t like doing, I am happier and get more done. I also have more time to focus on the tasks I like doing, or the tasks that make me more money. A great piece of advice I recently heard is: never work below your income. If you are worth $100 an hour, don’t do tasks you can hire out at $20 an hour. Focus on things that make you that $100 an hour or more and let someone else do the less important work.
Being a people person will help you invest in real estate
Being a people person is not a requirement, but it sure helps. The more people you know in real estate, the better chances you have of succeeding. Even other investors will help you out if you are willing to go to local investor meetings. At my first meeting, I learned a lot of information and shared a lot of information as well. If you are going to be a real estate investor you will have to deal with agents, title companies, inspectors, appraisers, contractors and other investors. The better you can get along with everyone, the more you will succeed.