Many people hesitate to start investing in real estate because, for them, there’s so much mystery about the process, which saps their confidence.
The key to getting started as an investor is just like everything else in life: Once you do it a couple times, it’s just not that complicated anymore. Additionally, talking to a professional (like myself) can also provide some much-needed clarity. So today I’ll focus on three key things to help you wrap your head around the concept.
1. Identify your risk profile. Not everyone is built the same way; some people are riskier than others. The same applies to the types of assets you can acquire in real estate. There’s land as an asset, where you get to build from the ground up, but this is a bit riskier. Shells are also a risky, but potentially viable, asset.
Apartments that have already been established and are currently being rented out are less risky assets to think about. They’ve likely got cash flowing already, and even if it’s not much, you’ve got renters paying down your principal and interest.
So, when thinking about your own risk profile, you need to consider what assets you would feel comfortable owning. Also, consider your investment horizon, or how long you intend to stay invested in an asset before cashing out. You can start out with a turnkey property and once you’ve built confidence in your investing skills, you can take on assets that will provide a bit more value down the road.
2. Demystify the process. We’ve all seen the shows on HGTV—many think that they could never do anything like the investors on TV because it’s all just so complicated. The key to dispelling the mystery around the process is to align yourself with the right resources.
Here at the Salas Team, we help our clients with the process. We can help you expand your contacts so that you have the right contractors, property managers, attorneys, architects, and so on. If you have the right people on your team, then everything will go much smoother.
3. Understand how to value an opportunity. I started this process by reading “Rich Dad, Poor Dad” by Robert Kiyosaki. The book will take you through the steps needed to learn how to value a deal, and I highly recommend you read it.
In addition, I built a spreadsheet with easy entry points with certain fields highlighted. Fill it in, and you can see your numbers from the income side, the expense side, and what you can expect in terms of a return for each asset class you’re pursuing. It’s essentially dummy-proof.
In the future, I’ll do more videos on how to value properties so that you can demystify the process and lower your anxiety, allowing you to begin the process with confidence.
If you’re interested in learning more about real estate investing sooner, however, please feel free to reach out to me. I’d be happy to discuss it more with you.