When it comes to your real estate profits, it pays to have a plan. Anyone can act on an impulse, but without a plan, you risk becoming the real estate version of a Star Trek redshirt: you’re boldly going where no man has gone before, but you risk an instant (and highly exaggerated) death the moment you arrive. Sure, a go-get-em attitude is a great thing to have, but it’s even better when combined with a solid and secure plan. So before you make your next investment, follow these 10 steps. Then sit back and watch your passive income profits grow.
1. Define your goals. Why are you considering investing in the first place? Are you looking to use your real estate profits as a retirement cushion? Do you plan to set up a college fund for your daughter? Or are you simply trying to show up Glenn from accounting, that one guy who thinks he’s some sort of a timeshare genius? Whatever your reasons, put that pen to paper and write them down. That way, you won’t lose sight of your goals later – and that’s good, since it’ll prevent you from making impulsive decisions.
2. Have a family meeting. Obviously, you don’t need to let your 8-year-old weigh in on the subject, but you should at least discuss your real estate investing plans with your spouse. Because your investment choices will effect your entire family, your family members should feel like they’re part of the dialogue.
3. Review your finances. Don’t just glance at your bank account. Meet with your financial advisor to get a clear understanding of your current financials and how they’ll be impacted by your purchases, costs and real estate profits.
4. Budget for the worst. Budgeting for the best-case scenario is a rookie mistake. Do the opposite. For example, if you’re looking into Florida foreclosures, plan for higher-than-expected repair costs. It’s far better to have too much money in your budget than not enough.
5. Select your strategy. There’s more than one way to invest in real estate. Are you interested in house flipping? Single-family rentals? Multi-family homes? Your angle has an enormous impact on which properties you’ll choose, so make sure your strategy is set before you move forward.
6. Enlist the help of an expert. We all think of ourselves as experts, but unless you’ve made real estate your career, there’s someone out there who has more knowledge and experience than you do. Don’t sell yourself short by flying solo. Seek out a reputable wholesale broker to help you turn your investing goals into real estate profits.
7. Research your market. The world of real estate investing doesn’t begin and end in your own backyard. With the help of your wholesale broker, you can purchase property on the other side of the state or even on the other side of the country. Instead of just looking for deals in your area, research markets across the U.S. Then choose the one that’s right for you.
8. Create a team. On the TV show “Survivor,” the alliance-forming contestants last the longest, and there’s a reason for it. The more solid your support, the more successful you’ll be when it comes to earning passive income. Your wholesale broker can help you create a team of property managers, skilled contractors and other trusted industry experts.
9. Know your next step. So you’ve zeroed in on a property and you’re ready to buy. What will you do next? Will you need to replace the siding, install new carpet or screen tenants? Know your next steps. Plan ahead so that your property doesn’t sit empty for months when it could be earning you passive income instead.
10. Stay realistic. When you’re finally ready, go ahead and purchase your property (you won’t make any real estate profits if you don’t!) but remain realistic. You aren’t going to wake up the next morning on a yacht full of supermodels, but you are going to wake up as the owner of a solid and secure investment. Remember to be patient.
When you were a kid, you didn’t need a plan. If you wanted a house, you built one out of tarps and sticks and whatever else you could find. Without a plan, you felt free. But as soon as it started to rain, your makeshift fort would collapse on top of you. As an adult, you can’t afford for your real estate profits to suffer the same fate. That’s why you need a strategy. So while you might feel tempted to get out there and snatch up a property as fast as you can, dial it back a notch. Make a checklist, and take it seriously. That’s how you’ll make the most of your passive income investments.