Everything you want is on the other side of fear. ~Jack Canfield
Many women want to get invested in real estate, but there's one big thing holding them back – fear! They're terrified of losing their money if they invest.
If you're one of those women who is resisting jumping into the real estate game because of fear of losing money, don't worry. I’m here to share with you 5 ways NOT to lose your money in real estate.
- Be Clear about your Desires
This is a big one. It's really important that you understand what exactly you want to gain from your real estate investments. This will help steer you in the perfect direction for an investment that's right for you.
There are many reasons why you may want to invest, so ask yourself questions to help you gain clarity.
- Do you desire to invest for cash flow so you can have passive income right now?
- Do you desire to increase your money available for retirement (you don't need to access the money for many years)?
- Do you desire to invest to lower your tax burdens?
- Do you desire to leave a legacy for your children?
- Do you want to be able to retire from your job and only work if you want to?
Why is it important to know your DESIRES before you invest?
The more clear you can get about why you want to invest and what benefits you desire, the less likely you'll be to invest in a property that's a mismatch and where you'll lose your money.
For example, let's say you desire to invest in something that gives you cash flow right away and will give you back all of your initial investment within 2-3 years. If you tie up your money in a real estate development that doesn't cash flow and won't make money for 5 to 10 years, that's a bad investment for you. If you pull your money out earlier than the investment requires, you'll lose money.
2. Be Resourceful
The main resources you need to invest in real estate are time, money, and experience.
You need time to find and manage your investment property.
You need money to purchase it, renovate it (as needed), and maintain it.
Lastly you need experience to find the right property and manage it effectively.
Get very clear on how much of each you personally have.
- How much time can I put into finding and managing a property?
- How much property management do I personally want to do?
- How much renovation am I willing to take on?
- How much money do I have to invest and how much debt are I comfortable with?
- How much experience do I have in finding, financing, renovating, and/or managing a property?
All these questions will help you figure out what kind of investment will work for you.
Many people lose money in real estate because they don't dedicate enough money, time, or requisite experience for the investment property they have chosen.
The good news is if you're lacking in any of these areas, you can partner with other people that have the time, money, and/or experience you are seeking.
A real estate investor goddess knows she doesn't need to personally have all the resources at hand; she just needs to be resourceful enough to partner with others who do.
3. Have a great team.
Successful real estate investors know that this is a team sport. You want the greatest team members as possible around you.
Who are some of the team members you need? Brokers, property managers, lenders, accountants, and more.
Your team will be big part of the resources that you rely upon. You can leverage their time, experience, and in some cases their money (e.g., lenders or investment partners), to get you successfully invested in a property.
4. Know Your Market.
Many investors fail because they buy in the wrong market or submarket.
Successful investors buy in areas where people want or need to be – areas with strong job and population growth.
They also buy where they and/or their partners team members are very knowledgable and familiar.
The difference between a successful investment and a failed investment can be as little as one wrong city block.
To not lose your money make sure you know your market well and/or have trusted team member(s) who do.
5. Buy the Right Property
Last, but not least, you can avoid losing your money in real estate by buying the right property.
What's the right property? It depends upon your clear DESIRES. The right property will deliver the benefits YOU desire.
If you want to buy a property that will provide you cash flow and will appreciate in value, then you should look for a property that:
(a) cash flows from day 1. In other words, from the beginning after you pay all expenses you still have income; and
(b) has value-added potential. A good property is one that is an ugly duckling – it could use some sprucing, but isn't in such bad shape that fixing it up will take all the profits.
A great ugly duckling could have good plumbing, electrical, foundations and roof, but have outdated apartments. If you give the apartments a new paint job, new flooring, and some new appliances the tenants will pay more rent. You'll have added to the income and therefore the value of the property.
You can also find value-add potential through a property that hasn't been managed properly.
By putting in better management you can: find ways to bring in new income streams, find ways to decrease costs, and have happier tenants.
All this adds value to your property and increases the bottom line.
Want to know more about what to look for in a property? Check out our Behind the Scenes video on: 9 Key Items Investors Look For When Checking Out an Investment Property.