Do You Have What It Takes to Make It Big in Real Estate?

If you’re considering making your fortune in real estate, you’ve probably heard of millionaire or even billionaire real estate investors. That’s because real estate is an excellent way to invest with the promise of a high return.

“After a decade of saving and investing, I think real estate is one of the best ways to make money and build wealth,” says Pauline Paquin of Huffington Post. “When you buy a stock, the only way you can make money is if the stock appreciates in value, and you sell it at the good time. With real estate you can make money in many ways; I can name those 12 off the top of my head, and there are many more.”

Paquin lists rental income, buying low and selling high, increasing equity, leverage, tax benefits, and profiting from refinancing as a few key ways to make money. She also talks about how real estate has lower risks and often greater rewards than volatile stocks.

The thought is pretty alluring, but not everyone is able to make it rich simply by purchasing a piece of property. Do you have what it takes? Here are some things you have to do.

Keep Finances Under Control

When you’re investing, it’s easy to spend promiscuously because there’s a promise of a return. If you let your spending get out of control, you might spend more than you earn in the long run.

“Every move you make financially should be carefully planned,” recommends an article from property management company Green Residential. “If possible, run your ideas by a financial advisor to make sure your personal feelings and perceptions aren’t masking your judgment. Each investment you make should be wisely calculated and thoroughly planned for ultimate investment success. That’s how you build an empire.”

Have a Background in Real Estate

Very few agents and investors are able to turn a real profit within the first year of sales. Jared James, a sales coach and former top-selling agent, says he didn’t make his first real commission until six months in.

“It takes time to build relationships, create context, show houses, and go though the process of a transaction,” James says. “Real estate is not like most careers where you will receive a paycheck two weeks after starting…Do yourself a favor and don’t sell properties full-time until you either have six months of living expenses saved in your account or you are in a situation, such as living with your parents, where you can keep your overhead very low.”

If you don’t have a background in real estate, it’s important to develop one. It’s also important to have a contingency plan in the likely chance that your investments won’t be as profitable as you might hope.

Develop a Niche

There are dozens of avenues you could take with real estate investing, as established in the introduction of this piece.

Richard Warren of Bigger Pockets recommends choosing something you enjoy for success in your chosen niche. Otherwise, you might throw in the towel prematurely.

“With so many different aspects of real estate investing, there is sure to be something that you are good at and enjoy,” he explains. “Nothing in life is perfect, but you need to choose what is best for you. Spend time investigating different aspects of investing until you find something that you think you would enjoy. Proceed slowly until you find out if you are suited to that particular investment style. When you discover your niche, run with it.”

Treat It As a Business

Too many investors are solely interested in spending a few hours per week on their real estate investments, and they end up losing money in the end. Your investment, like any good business, requires proper planning and realistic goals to succeed.

A Forbes article strongly recommends starting any real estate investment with a business plan. “A business plan allows real estate investors to not only identify objectives, but also determine a viable course of action toward their attainment,” it reads. “A business plan also allows investors to visualize the big picture, which helps maintain focus on the goals rather than on any minor setback. Real estate investing can be complicated and demanding, and a solid plan can keep investors organized and on task.”

Start Small, and Keep Moving

One of the main ways to start small is through real estate crowdfunding investments. If you’re not sure who to ask your questions to, ArborCrowd and similar other sites are a good place to start. Many agents and investors take on too much and end up giving up before making a profit. Brandon Turner, residential real estate investor and contributor for Forbes recommends continuous forward momentum as the solution for combating burnout. Businesses and individual agents can also make use of professionals like Close Concierge‘s transaction coordinators to help save them time on certain jobs so they can focus on the most important parts of their job.

“I’d encourage you to not get overwhelmed, not try to learn everything,” says Turner. “Pick one niche (like single family houses, commercial properties, etc.) and one strategy (like rental, flip, etc.), and focus on that. Read one or two books on the subject, and then start moving! Find someone local who is doing the same thing as you want to do, and take them out to lunch. Ask for help, but don’t stop moving!”