Resolving the Real Estate Investing Fear Factor

If you are a new real estate investor you have considered investing in real estate but because of the nagging feeling that you are sure the market will collapse once you step in and you will lose all your money; Guess what, you’re not alone.

Fear grips every new investor. No one who succeeds in investing in real estate today would say otherwise. It is common for potential investors to miss amazing opportunities for no other reason than an overwhelming feeling of fear.

Well, let’s tackle some of the most common concerns and see if we can help you become less anxious, perhaps indulging in real estate investing after all.

Negative cash flow

Hi, the idea behind investing in rental property is to make enough money to cover operating expenses and pay the insurance with some left to deposit in the bank. Having to feed the property will not cut it; No investor wants to feed a rental property out of pocket.

Believe it or not, this fear may be the easiest to manage because it’s straightforward: simply run the numbers before you buy. Get the property’s last 12 months’ income and operating expenses, calculate your mortgage payment, and plug the results into a spreadsheet or real estate investment software to determine cash flow. If the cash flow is negative, then so be it, otherwise dispel the anxiety and move on.

Just be sure to use realistic rents, the vacancy rate (even if the landlord claims full occupancy), operating expenses (don’t forget about alternative reserves), and a insurance payment to calculate the annual cash flow.

Also, never walk away just because a property indicates a negative cash flow. Dig a little deeper and find ways to manage cash flow. Many rental income properties become passive simply because of poor property management; You may have the potential to increase rents and reduce operating expenses. Who knows, you might discover a real opportunity that the current owner is overlooking.

This is not the time

Yes, for any number of national or international events, potential investors often feel that it would be worth waiting for better times before investing in real estate.

But real estate investment has nothing to do with the economic climate at the time of purchase. Above all, think about the long term. Depressions come and go, but how will investment properties affect your future rate of return? That’s what matters.

If it helps, keep in mind that unlike the volatile stock market, realestate has a deep track record to value consistently. It probably doesn’t happen overnight, and isn’t without occasional difficulties, but historically, real estate values ​​rise over time.

lose your money

Of course, you wouldn’t want to use your savings to make the biggest financial investment of your life only to end up losing everything.

The key, however, is study and research. Find out about the property you want to invest in, and the area in which you plan to invest. Look for sources of information such as seminars, university courses, real estate programs, and real estate investment books. Get an expert property appraisal from a real estate investment professional or property appraiser. There is always some risk when investing in real estate, but developing a plan with knowledge will negate most of your doubts.

Tenant and management problems

Well, that’s right. Nobody wants the headache of having to fix a fridge or arguing with an unruly tenant; It is understandable why this concern prevents many people from becoming real estate investors. But life is always a series of trade-offs, and trading the occasional migraine for potential future fortune is generally worth it.

However, it is also true that over time you will learn how to deal with and manage most of your sleep problems. If not, you can always enlist the services of a reliable property management company to handle it for you. For about ten percent of the rental income, the property manager will do all the dirty work; The advantage is that it will relieve you of the time and stress of having to deal with renters and repairs, thus putting things like late rents in the hands of the experts.

Lack of real estate experience

Just because you haven’t purchased an investment property yet shouldn’t stop you from investing in real estate. In this case, select a local real estate investment broker to help you.

When it really comes time to buy a property with rental income, you will be surprised to discover that it is not as malicious as it seems, and eavesdropping on the mind of an expert will greatly increase your comfort level. But the key word here is investment property specialist. An agent who only sells homes will not do you any good; You want a real estate professional with real estate investment experience.

It’s time to start

Certainly the hardest part about jumping into real estate investing is getting started. We are great at making excuses, and there are always so many reasons to put off starting something new.

Yes, we want to be careful. It is better to put in breaks and deal with real estate with enough knowledge. 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 real estate market, and develop a roadmap around the financial security you hope to achieve.

Next, choose your first rental property, make the purchase, and then take the position of manager. If you stick to the goals of your investment plan, calculate the numbers, do your due diligence right, and work hard to increase income and control expenses, in time, you will be able to move into bigger and better real estate.