The Real Estate Investor
Successful investing in real estate parallels starting a new business; it demands market knowledge, education, identifying a niche and working with the right people, including your REALTOR®. Real estate investors must approach their real estate activities as a business in order to establish and achieve short- and long-term goals. Those who have achieved their goals began with a business plan acknowledging that real estate investing can be complicated and demanding, and that a rock-solid plan can keep them organized and on task.
Effective real estate investors acquire an in-depth knowledge of their selected market(s), often times from an agent whose primary business it is to keep abreast of current movement, including any changes in consumer spending habits, mortgage rates, and competitive analyses. Understanding these factors could mitigate risk and identify opportunities. Familiarity of a town or city is critical, but more so, intimacy of a neighborhood or “village” within a geographic area is another key to success. This in-depth knowledge will provide the foundation that can be applied to other areas going forward.
The watch word of real estate has always been location, location, location. But there is a change afoot: now the mantra has evolved to include condition, condition, condition.
Where does this and other information come from? As stated above, a close association with a REALTOR®, especially one who recognizes trends and potentially identify off market properties, is one valuable asset. As can be existing renters, neighborhood establishments, and business associates. Rather than risk time and money tackling a difficult problem alone, successful real estate investors know it is worth the additional fees to embrace other’s expertise. But maintaining honesty, integrity and commitment are essential in fostering these relationships.
Any ad for stock or commodities investing carries the warning about the risks involved. Know your tolerance. We are fortunate in the Boston area not to have seen too many properties go under water and most seem to have a significant upside over time. Prudent real estate investors understand the risks—not only in terms of real estate deals but also the legal implications involved—and adjust their business plan to reduce those risks.
Many go into real estate investing believing that it is a simple way to acquire wealth. It is not. Investing can be nerve racking, especially when things such as carrying costs, empty units, utilities and looking at long term business growth can be challenging. As much as it is a numbers game, it is also a people play.
Real estate offers many opportunities to maximize that upside potential while minimizing the chance of losing money. Nothing is absolute. Money can be made and lost in real estate, but as an investment tool it has few equals.
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