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Remedies for Real Estate Investing Fear
Since fear grips every new real estate investor, and it's common
for potential real estate investors to miss out on incredible opportunities
for no other reason but an overwhelming sense of fear, let's address
some of the most common fears and see whether we can help you to become
less anxious, and maybe take the plunge into real estate investing after all.
Negative Cash Flow
The remedy for this fear is straightforward: simply run the numbers
before you buy. Obtain the property's last twelve months income and
operating expenses, calculate a mortgage payment, and plug the results
into a spreadsheet or real estate
investment software program to determine
cash flow.
Just be sure to use realistic rents, a vacancy rate (even if the
owner claims full occupancy), operating expenses (don't forget replacement
reserves), and a loan payment to compute your annual cash flow. You
can see a sample APOD at www.proapod.com to see what it should look
like.
Bear in mind, however, that many rental income properties go negative
because of poor property management. Dig deeper to see if you might
have a probability of raising rents and cutting operating expenses.
Who knows, you may even discover a real opportunity overlooked by
the current owner.
Not the Right Time
Yes, potential real estate investors often feel it would be advantageous
to wait for better times before making an investment in real estate.
But real estate investment has little to do with the economic climate
at the time you buy.
If it helps, bear in mind that unlike the fluctuating stock market
real estate has a profound record for steadily appreciating. Perhaps
not overnight, and not without an occasional bump, but historically,
real estate value does go up over time.
Losing Your Money
Of course, you wouldn't want to tap into
your savings to make maybe the largest financial investment of your
life only to wind up losing it all. But here's the secret: study
and research.
Learn about the property you want to invest in, and the area where
you plan to invest. Look for sources of information like seminars,
college courses, real estate software, and real estate investing books.
Get an expert appraisal of the property from an investment real estate
professional or property appraiser. Simply develop an investment plan
with knowledge.
Tenant and Management Hassles
Okay, who does want the headache of having
to repair a refrigerator or to fuss with an unruly tenant? But life
is always a series of trade offs, and trading off an occasional
migraine for potential future wealth is generally worth it.
If you think not, you can always hire the services of a reliable
property management company to deal with it for you. For about ten
percent of the rental income, a property manager will do all the dirty
work and relieve you of the time and stress of having to deal with
tenants and repairs.
No Real Estate Experience
In this case, simply locate an investment real estate agent who specializes
in investment property to assist you.
You'll be surprised to discover that tapping into the mind of an
expert will increase your comfort level significantly. Just be sure
to work with an investment property specialist. A residential real
estate agent won't benefit you; you want a real estate professional
with true real estate investment experience.
It's Time to Jump In
Yes, it's always hard to get started, and there are always numerous
reasons to put off jumping into something new.
So if you're struggling, here's my suggestion: learn, research, and
plan. Educate yourself about real estate investing, learn about real
estate in general and more specifically about your specific real estate
market, and develop a road map about the financial security you hope
to achieve.
Next, pick out that first investment property, make a purchase, and
then take over as manager. If you've stuck to your investment plan
goals, calculated the numbers correctly, did your due diligence, and
commit to increasing income and controlling expenses, you'll be able
to move on to bigger and better properties in no time.
Education, research, planning, investing, and managing are, after
all, how real estate investors succeed at real estate investing.
Back to the real estate investing learning center...
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