Updated July 19, 2021
By Joan Selby
Investing in real estate is not easy, sometimes not pleasant, and too many times, risky. To invest, we have to understand how to deal with the stress, anger, and failure that comes with it. We have to be able to lose to win. If you do not feel this way, this is probably not made for you – and that is totally understandable! Investing in real estate is not for everybody.
But if you do think it is right for you, welcome!
It is the smartest choice you could take.
Real estate mogul Tamir Sapir once said, “If you’re not going to put money in real estate, where else?” So true. The definition of investment is “devoting, using, or giving of time, talent, emotional energy, as for a purpose or to achieve something.” And what you are achieving is a financial success.
Since you are already here, you probably know all this. So I am not going to spend more time motivating you. I will try to answer the most common questions asked while investing. If there is anything else you would like to add, don’t hesitate to leave a comment. We highly appreciate the feedback!
5 Common Questions Every Real Estate Investor Should Consider
Question 1: Why do I invest?
If you don’t already have an answer to that question, it is time you think about one. There are so many reasons why people invest, and most of the time, our real answers get lost on the way. Unfortunately, that often leads to giving up. This is not beneficial once you have already put a lot of time and effort into it.
What is the purpose of giving up if you have already started? But why stay, when you don’t know why? So the most important question to ask first is: what is my reason for investing in real estate?
It seems a relatively simple question, but is it really?
Your reason could be a better life, seeking approval from your friends, helping people, or even using that property yourself. It doesn’t matter, as long as you know why you are doing this, and why you cannot give up. After you figure out the reason, set goals to help you stay focused.
Question 2: How can I financially support my real estate deal?
This is what keeps some people from investing their money in real estate. They have the courage and attitude, but no financial resources to start.
So what do they do?
I have been in that situation before, and I can tell you that the best option you might want to consider is applying for a bank loan. This is the exact reason why I said you have to be brave to invest – there is a slight chance you might never see that money back.
So how can you prevent that from happening? By continually updating your information on the real estate market, and knowing when to sell, buy, or keep, there is a fair chance you will not actually risk everything. Using tools like Rentometer to analyze local rents and what the area holds for rental units available and necessary will help mitigate risk. That does not mean that your mindset should not say “I’m all in.” You have to understand that investing is not gambling, but it is risky overall.
Question 3: Why should I rent, and what benefits do I get?
After the purchase, renting is the easiest way to become more than financially stable. As a real estate investor, you get so many benefits from taxes, but not only. If you work smart, you could keep seeing returns up to 10%. If you work even smarter, you could see returns up to 20%.
Also, if you took a bank loan before, renting will open new ways to pay for it. The tenants’ money will serve for your adjusted payment to the bank, while your own money can go into buying more property. And this is how you financially grow!
Question 4: What are my risks exactly?
I kept exposing this problem, so I feel the need to explain it better. As I have said before, some risks come with real estate investment. For example, if you plan on buying a property that is not rentable, there is no way you could pay back your bank loan.
Usually, tenants look for pleasantly designed places to live. And you have to understand what your customers look for to succeed. Sometimes even sharing your property online could be a disadvantage if you don’t know how to make it look like the best property in the area. Your writing has to be good. Your style when sharing your home has to stay friendly but business-related.
Question 5: What should I know when I am trying to buy a home for the first time?
First, check your credit score. That allows you to understand what’s going on with your financial resources. Second, get pre-approved to get a bank loan. This is not entirely up to you. Your lender is making the math and then gives you a final result. Make sure you get pre-approved, not pre-qualified. There is a big difference between those two, and you want the former for safety reasons.
Third, find out how much you will pay in closing costs. If you cannot cover the costs, reconsider the time of purchase. Finally, prepare to hunt down hundreds of places. Make a list and stay organized!
There are not a lot of rules to be followed; you have to go with the flow. The primary advice I can give you is taking a calculated risk before you act. Do your best to researching rent amounts in the area and across types of rental units. Rentometer.com has excellent tools to help you discover what current rentals are listing for and bringing in monthly. This will help you analyze your rent and purchase. Other than that, everything will go well if you keep yourself informed. Good luck to you, my dear colleague investor!
If you liked this article, subscribe to Rentometer's email newsletter to stay up-to-date on the latest trends in rental housing.