It was Saturday night, and rather than spending time with my hubby enjoying wine and a movie, we were scrambling to get a house ready for a new tenant move-in. We were scrubbing toilets, wiping down the showers, sweeping the floor, and throwing away remnants of construction waste. By the time we loaded all of our cleaning supplies and construction tools into my car, it was nearing midnight. We drove home exhausted.
“Real estate is my life. It is my day job, if you will. But it consumes my nights and weekends, too” – Ivanka Trump
I’m not a full time real estate investor, however, I sometimes feel like my real estate investments are consuming my life. Over my past seven years of real estate investing I vividly recall times when I spent vacations, evenings, and weekends working on my real estate portfolio; everything from researching markets and acquiring properties to book keeping and taxes. The most time consuming experiences have been renovating properties. There have been many, many, many nights where my husband and I were either installing a new kitchen, painting, dry walling, framing, or cleaning.
It wasn’t always my dream to own rental properties, however, I knew that it was the best way to get a steady income and create wealth to reach my goals. I overcame significant challenges and evolved into an experienced, savvy real estate investor, and I know what it takes to be successful in this industry. Before becoming a hands-on real estate investor, here are four important questions to ask yourself.
Are you in it for the long haul?
Do you want to be a millionaire? Do you expect to have tons of money coming in immediately after your initial investment? I hate to break it to you, but real estate investing is not a get-rich-quick scheme. For one, real estate is not a liquid investment. Depending on market conditions and desired price, it could take months to sell a property. Moreover, to sell that property you may have to pay capital gains taxes, land transfer taxes, realtor commission, and legal fees. If you don’t manage your portfolio properly, using a proven methodical system, you can lose a lot of money. If you have patience, a strong commitment to your goals, and discipline, then real estate investing is for you. I’ve personally seen many people become millionaires investing in real estate, however, it takes time for it to become a lucrative investing vehicle.
Are you a handy person?
My husband and I are fairly handy. It’s common to get a call about a leaky faucet, broken dishwasher, or leaky shower. The great thing about being handy is that you save a lot of money if you do the repairs yourself. However, having personally repaired faucets or broken screens, I realized how time consuming and slow I am at doing it. Now, I use a handyman for most of my repairs and maintenance on my properties.
Bottom line, it doesn’t matter if you are handy, or not. You should always invest in properties that cover maintenance costs because you don’t know when your situation might change and you either no longer want to do the repairs, or you are no longer able to do the repairs. In either case, you want to maintain profitability.
Are you ready to be a property manager?
I vividly remember getting a call at 10 pm about a water leak in one of my rental properties. I was six months pregnant with twins and my husband wasn’t home. As the property manager, I had to trot over to the property in the middle of the night, shut off the water, and poke holes in the ceiling to release the trapped water. I spent many hours over the next couple days dealing with this problem. Although this was not a regular occurrence, the more properties you have, the more likely you are to encounter an issue like this.
Another issue to consider is tenant conflict resolution. You meet a lot of people as a property manager. Some are friendly, honest, and respectful; some not so much. A good tenant verification process will screen out most of the bad tenants, but not all. I have experience dealing with complaints about tenant domestic disputes, tenants who wreck the place but try and blame it on me or refuse to pay for their damage, and tenants who want to break their lease in the middle of the winter. All these tenants know your phone number, your email, and your home address.
In the end, this question comes to the same resolution. Always plan for a property manager, since plans can change and eventually you may no longer wish to do it yourself.
Do you know how to manage the risks in real estate investing?
‘Risk comes from not knowing what you’re doing.’ – Warren Buffett
Real estate investing isn’t a big risk if you are in it for the long haul. However, a lot of real estate investors have the mindset to become a millionaire overnight and end up chasing after the money in high-risk investments. High-risk investments include no-money-down schemes, over leveraging, get-rich-quick investing strategies, and buying properties based on speculation that end up being money pits. Managing risk means knowing what you are doing. A sophisticated real estate investor spends a significant amount of time learning, reading, networking with like-minded investors, and evolving their investment techniques and procedures.