For most real estate investors, the two primary attractions are an interest in the housing market and the promise of excellent returns with each turnover. Investors have the potential to make tens of thousands of dollars without having to quit their day job. That’s a pretty impressive holiday bonus.
However, too many investors jump into the real estate business without total giving consideration to all it involves. Their eyes glow with the promise of money, but the challenges and hurdles that accompany the journey can pose unpleasant, and often debilitating, challenges.
If you’ve been thinking about a career in real estate, make sure you’re prepared for it by recognizing some of the truths about the industry. Here are some of the things that pros are liable to tell you they wish they had known before starting.
1. Without a passion for the business, you’re not likely to succeed.
The love of money simply won’t be enough to generate success in the business. Real estate mogul and future U.S. President Donald Trump believes this was a key to his success in the industry.
“I … loved what I was doing,” he says. “I had a passion for real estate, and I believe that is the most important thing. You have to love what you’re doing.”
There are aspects you might not always like, but you’ll have to have an underlying love for the industry and the details of the business to make it big. Otherwise, you’re unlikely to put in the time and energy that are necessary to build wealth in real estate.
2. This isn’t an entirely solo career, and the wealthiest players usually have partners.
To begin with, a real estate agent will almost always start by working under a broker: someone who’s been in the business for at least a few years and can oversee the selling and purchasing functions of property management without committing a lot of errors.
Whether you’re an agent or an investor, you can learn a lot from a seasoned professional. Also, beginning speculators will often partner with a more wealthy investor to get their feet wet.
The experienced investor will provide much of the capital and some of the expertise, while the younger person does a lot of the grunt work. It can be a grueling process, but it’s a great way to get more experience and see wealth grow more quickly, even though you’ll be sharing your profits.
3. You can’t instantly sign up to be a real estate investor/agent.
Though it’s true that you need little more than a high school diploma or equivalent to start a career in real estate investing, you can’t decide on a Friday that you’re going to do it and begin on the following Monday. Several initial but necessary steps could take months.
The first is to get your real estate license, the requirements for which vary from state to state. You’ll pay a fee to study the material and take a state Realtor’s exam.
Once you’ve passed, you’ll have to pay another fee to collect the license. You might need multiple licenses to work across state lines, and there are requirements involving continuing education and license renewal as time passes.
You’ll also need to obtain MLS (Multiple Listing Service) access, pay Board of Realtor dues, collect appropriate technology (computer, smart phone, etc.), order business cards, put up signs, advertise yourself, build a website, and more to get going. All of this entails fees and extra costs that can be hard to anticipate ahead of time. Be prepared to absorb all of it to get started.
4. It takes time to build wealth.
There are many ways to build wealth in real estate. As an agent, you’ll be making a six percent commission on any home you sell, but you usually have to split some of that with brokers and other agents. As a property investor, you’ll build wealth based on the market.
No matter what niche you’re in, you won’t get rich in a day. The majority of investors have to spend months understanding the market, building clientele, making renovations on to a property or three, and performing other important tasks to cement their career.
You’ll also make a lot of mistakes along the way that may set you back thousands. Only after you’ve mastered a few specific areas and learned proper patience are you likely to see real wealth.
5. Real estate will become a startup for you.
Many beginning investors get underway while holding a day job. Initially, real estate investing is typically more of a side project than a business.
Once you’re investing in real estate and you see real profits, however, it suddenly becomes a startup rather than a side project. “Treat this as a business, because it is,” says Travis Lazenby in his eBook Basic Training for Real Estate Math.
It will require a business plan, tax preparation, endless hours of work, unique ideas, and creativity for it to continue moving forward. If you’re not prepared to foster a business, it’s best to avoid investing in the first place. too many investors jump into the real estate business without total giving consideration to all it involves.
