investing in real estate

Things to Know Before Investing In Real Estate

Everybody loves a good overnight success story, but we all tend to overlook the years of planning, skill building, and experience that position a person for success. The rare few who seem instantly successful when investing in real estate have actually been preparing and building the knowledge to succeed for years. Enthusiasm and determination aren’t enough to fix a bad project, but a severe lack of rehab know-how is certainly enough to cause a flip to flop.

Success in real estate investment comes from having the right skills and preparation at your disposal. It can be tempting to jump at one of the many sales pitches, commercials, and TV shows telling you how you can make money investing in real estate without any experience. While it may be tempting to jump in head first, house flipping success doesn’t happen by accident. A reasonable investment strategy is built over time. As we’ve advised in many of our articles, do your homework! Use the article below as a starting place for things to know before investing in real estate.

1) Know the Area you Plan to Invest in

investing in real estateThis is fairly obvious advice, but essential when investing in real estate! Knowing the area doesn’t mean to simply know if the neighborhood is hot or not, it means to research why it’s hot or not. Is the school district in demand? Is it easily accessible to public transportation? What is the crime rate?

All these questions and more need to be answered, so if you don’t know the answers to them, make it your business to find out before investing a single cent.

2) Know your Target Market

You can stereotype with the baby boomers, Gen X, Gen Y, Millennials and so on, but when investing in real estate, it only goes so far. How you rehab a property should vary depending on the target market. You should know all the demographics age group, couples, families, gender, race, religious affiliation, household income, etc. From there, you can research what that particular demographic enjoys in their homes. The little things matter in pitching your target market, and no matter what demographic, all will take into consideration the smallest of details.

3) Know Your Team

investing in real estateMaybe you are a Superman or Superwoman and do everything yourself, but chances are, you have a team around you. Choosing a good team is vital as we’ve stated in multiple articles. Knowing your team is just as important. Know their strengths and weakness. A lot of times, people partner up with their friends, which is fine, but a partner should balance you out. For example, if you have expertise in plumbing and landscaping, it doesn’t make much sense to partner up with someone with the same strengths. Identify your own weakness and fill those gaps with partners, realtors, lawyers, electricians, and plumbers that specialize in your weaknesses. A well rounded team is essential to success when investing in real estate.

4) Know the Economy

This doesn’t mean you need to know the U.S. Economy and all of its minute details. You should know its overall current state and how it will affect what you charge for rent, the after rehab value, and much more. This is where some consumer behavior classes or books can really help you understand your target market. Knowing the current state of the economy will only benefit you in your efforts beyond the physical work you do on a property. That is half the battle.

5) Know to Plan for the Worst

Maybe it is the Philly in us, but you MUST plan for the worst. Some people don’t like to think they will ever fail, but it is a certainty in life, so take it in stride. When asking for quotes, present your worst ARV. When estimating a holding time, take the amount of time you think it will take to sell and add two of three months. Do the same with utilities, monthly payments, etc. As we have talked about, the unexpected is the only thing you can expect on projects, and that unexpected could prolong your project a couple months.

6) Know how to Manage Relationships

If you’ve ever read How to Win Friends and Influence People by Dale Carnegie, you know how important this is. How do you treat your team? How do you treat the title company, lender, and law office representatives? You can bet that someone that conducts themselves in a professional manner, even in the highest risk situations like in real estate, is more likely to get what they want. We deal with people who act like petulant children when they do not get their way, and it is truly unbecoming and makes us less interested in working with them. Treat others as you’d like to be treated and you’ll find that there is success in that alone.

7) Know how to Control Emotions

investing in real estateWe have a client at RFG that is calm as a cucumber. He does not waver when sellers threaten to back out. He stands firm on costs from contractors. Of course, he manages those relationships in a professional manner as previously mentioned, but he never lets his emotions get the better of him. As trivial as this may seem, it is not, and it may be the difference between you getting a property inside your budget or outside. We have all seen the person who doesn’t get their way and starts to unravel. Its unbecoming and unprofessional. The best business men and women keep calm, like the best athletes, in the stickiest of situations. Shouldn’t you model your behavior after the best?

8) Know Yourself

We mentioned that you should know your weaknesses, but you should know much more than that about yourself. You should know your strengths, your limitations, your budget, what irritates you throughout a project so to plan in advance to avoid it, etc. This is the quintessential what to know answer. You change constantly. The person you were in college is different from the young profession in you, and the middle-aged you, and so on, so to ask the question multiple times throughout your career is wise. If you don’t know yourself and what makes you tick, you can bet your real estate career will be short-lived one.


A great way to make sure you have all of these things in place is to have a well-written business plan. You can download out free Business Plan Template and get started today!