The grass is always greener, right? When you hear so many stories about people making a killing on real estate, it can be hard not to feel a little envious. There is no doubt that real estate can be very profitable, just don’t fool yourself into to thinking that it is easy money. It isn’t. When it comes to real estate investing, it takes a lot of work to be successful, and not everybody is cut out for it.
The so-caller “real estate experts,” publishing books and producing television shows about real estate investing, tend to show you the rosy side of things. They are trying to sell their books or get you to watch their show, so why shouldn’t they? They probably wouldn’t do too well if they scared you off with doomsday scenarios. But if you are considering taking the plunge from watching others invest in real estate for entertainment, and actually doing it yourself, you need to wake up to a harsh reality: Investing in real estate is not easy.
Buying, selling, and leasing properties can be a stressful and time consuming enterprise. It takes a certain type of person to be a successful real estate investor. It doesn’t take any exceptional ability, but it does take determination. It takes someone who really wants to make something of their situation and isn’t afraid to get their hands dirty when necessary. If you want to sit back, collect rents and never have to get personally involved, perhaps investing in a real estate investment trust (REIT) or partnering with a more hands-on investor might be a better idea.
If you want to succeed in this business, you’ll need to be willing to do whatever it takes to make things work. Whether you are fixing and flipping single-families or fixing and renting multi-families, its a lot more than buying a property and collecting checks each month. Even if you are going to be paying others to do any rehab at a property you’ll still have to consider things like arranging loans for acquisition and repairs, meeting with inspectors, hiring contractors, locate tenants or buyers, pay bills, manage occupied units, perform annual tax returns… These things and more will always be hanging over you.
Things rarely go according to plan, so you’ll need to be able to find the time and motivation to occasionally deal with problems as they arise. Over time, as you begin to build relationships and equity as an investor, you might be able to step back from some of the day-to-day stuff. Maybe even all of it at some point, but when you are getting started, you’re going to have to wear various different hats and do what needs to be done. If that is a lifestyle you don’t think you can handle, you should think long and hard before buying any property. However, if you relish in the thought of taking charge of your financial situation, and don’t mind a little hard work to get things going, you might have what it takes to be a successful investor.
If you’re not daunted by the workload, your next consideration needs to be how you are going to pay for your new dream. With the age of 100% financing gone (probably for good), you’re going to need to have access to cash to get anything done. In the next article in this series, we will ask: How to pay for your real estate investments?