In the past several years, real estate investing either for passive income or to sell at a profit has become a popular conversation.
A widely held perception is that owning real estate for income or “flipping” properties is an avenue to an easy, luxurious lifestyle.
While real estate is a solid avenue to build wealth, owning properties to either sell or lease is not as easy as it’s often portrayed.
Although there are a wide range of opportunities to make money in CRE investing, this blog will be geared towards holding property to generate passive income.
As a young real estate investor, I know it’s never too early to get started.
In fact, getting started in real estate investing at a young age can make a substantial difference by retirement because of the power of time value of money.
Here are a few tips for others new to real estate investing
Risk of an investment is difficult to navigate.
Especially when someone is young and may not have the capital to buy “safer” assets, riskier investments may seem to fit better in the budget. Although it is tempting to purchase a less expensive asset with the opportunity to make a higher yield, approach this option with caution.
If a significant portion of a person’s net worth is going into one deal, it is better not to take the gamble on an investment that would wipe out your investment capital.
Location, location, location…You know I had to say it! Coupled with risk factors is location. An asset may have problems, but many of those problems can be completely resolved or reduced. You cannot fix a location issue.
When you are young and starting out in your real estate investment career, find wise, experienced people in the field you can trust. Ask for help. Ask for advice. Learn all you can from other’s mistakes. Find someone or a few people who have experience and your best interest at heart and seek their advice.
Build a strong, solid network of professionals in related industries. Don’t miss an opportunity to tell someone who you are, what you do, and ask about their profession as well. You wont only create business relationships, but you’ll make friends as well!
Knowledge is Value
I cannot stress this point enough. Learn the market, and learn everything you can about the asset class you are focused on owning. Become an expert, read books, ask questions, read the latest news. Learn learn, learn! In any profession, the most valuable asset we have is our knowledge. Before you invest in tangible assets, invest in your knowledge base.
Similar to knowledge is having some focus. It is hard to become an expert in every asset class. It is tempting to seize an opportunity in multi family when all you know about is shopping centers.
Although I’m not advocating to only own one asset class in real estate, (in fact, a diversified portfolio is really important) if you’re first starting out and learning the basics, go with what you know.
What’s Your Advantage?
What may be the best property for you to buy may not be the best for someone else. Everyone has some type of competitive advantage when it comes to buying properties. The advantage may be a skill, resource, knowledge about the market, proximity/interest in an area, etc. Find your advantage, and keep that in mind as you look for opportunities.
The Best Time is Now
If you wait until the “perfect” time, opportunity, or circumstance to take action, then you’ll never get started!
Although based on personal reasons and the economy there are better times to buy than others, there is never a “perfect” time. Don’t put it off until tomorrow, next month, or next year to get started.
It’s Okay to Miss Opportunities
Opposite to those who are hesitant to get started are those who will get a plan…and then get derailed. It’s important to seize opportunities when they come available, but it is okay to miss an opportunity if the timing is not right for you. Get a plan, and don’t get sidetracked. Just because something is a good deal doesn’t mean it’s a good deal for you at this specific time.
Misery is comparing yourself to other people! There will always be investors who are on a similar path, are way ahead of you or haven’t even gotten started. Celebrate other’s victories and keep running your own race.
One Step at a Time
The game of real estate investment is a long-term game. Be proactive but have patience.
Although there are investors who have been in the game much longer than I have, I believe I bring a unique perspective to the CRE investment conversation. I have learned how to ask for help, seek wise counsel, and stay focused on what I know best.
If you’d like to discuss real estate investing, this blog or anything related to commercial real estate, let’s connect!
McDaniel and Company