As a potential new investor, you’re probably worried about several new items that you’ve never had to worry about before: cash flow, schedule of the project, who you’re going to have complete the work, what will be found behind the walls, what surprises are waiting for you… And it’s all normal. This list will help you consider a few things that are within your control that you can take ownership of to make the entire process easier and more efficient.
Steps for First-Time Real Estate Investors
- Create a legal business for your real estate empire. I will never recommend investing in real estate under your name. If worst comes to worst, you do not want to lose your personal home because of a deal gone wrong in your business. Creating an LLC or sole proprietorship is a simple way to protect yourself and can be done quickly and affordably.
- Change utilities into your name. These should absolutely be in the investors name and not in the contractors name in the event that the contractor you hire to begin the project isn’t the contractor that ends the project.
- This is business – not personal. If you aren’t pleased with the output of your contractor, communicate that respectfully. If you feel that things are being handled that are outside of your control, ask for more communication. If the contractor is out of their depth, be prepared to step in and stop the bleeding. This is your project, this is your livelihood and this is your financial success and legacy – don’t let someone else take control of it. Find a partner who understands the risks and rewards and can teach you what they know.
- Make sure you have a written estimate and contract with a scope of work. This goes back to the above point of thinking of this as a business – you need to have a legal document, signed by both parties, that lines out the scope of work and expectations. Timeline, products, budgets by scope (depending on funding), etc should all be in black and white so there is no question as to what needs to be completed when the studs are exposed.
- Do your research. Get to know the area you want to invest in. Start with a realtor who wants to work to earn your business. Watch the market. You need to understand what the value of real estate is in your chosen market and specific area.