Why haven’t you set your real estate investment goals yet? We know the answer. You are busier than ever with the family, the job, searching for new investments, and, if you are lucky, hitting the gym a few times a week.
And now, someone wants you to sit down and write down your real estate investing game plan?
Get outta here!
What if we told you that, as a real estate investment lender, when you come to us to ask for investment funding, one of the first things we want to know is what your overall borrowing goals are? We want to know why you want to invest in real estate, and where you hope it takes you.
If you don’t know that … and we don’t know that … then how can we help you develop a long-term focused real estate investing game plan and strategy?
Short answer: we can’t.
This is important. That is why we have developed a shortcut to help you determine your real estate investment goals as a borrower.
If you can answer the following three questions, you will be golden.
Question #1: What do you want real estate investing to do for you?
Think seriously about what you are doing in real estate.
Are you looking for short-term gain, long-term wealth, and/or financial security?
Your answer to this question will depend on a lot of factors like your age, family situation, construction skills, current employment, job management experience, free time, and tolerance for risk.
But, if you know why you are investing in real estate, it can keep you from taking the long way around to your goals. For example, if you want monthly cash flow, you will be purchasing a different type of property (likely something in a rougher area with lower costs), than if you are investing for appreciation (in which case you would probably be searching for property in a nicer neighborhood).
Question #2: What real estate asset class do you want and why do you want it?
You have many real estate investment options in terms of asset class. You can invest in residential single-family homes, multi-family, commercial mixed-use an industrial, and even build from the ground up. Each one of these requires a different level of time, commitment, funding, and expertise.
The big question is which real estate investing asset class can get you where you want to go in the timeframe you have to get there?
There is a lot to learn here, but it is helpful to learn about the differences between these asset classes and what you are going to have to put into them in terms of your own time, risk, and resources.
For example, many people want to own short-term rentals (STR) properties. But it is not as easy as it looks. In fact, some STR owners find that learning the platform (VRBO, Airbnb), managing the renters, reviews, cleaners, and regular and emergency maintenance on their STR’s is a part-time job.
Do you have the time and resources to manage this type of investment? And do you have the financial resources to weather the storms that could impact your rental income? If not, a long-term rental in a tried-and-true location is a better investment for you.
Do your research on all the real estate investment asset classes to figure out which one best fits your needs. (See my Quick Tips below on ways to do this.)
Question #3: What are your financial means?
The scale on which you choose to invest in real estate is important. For instance, many have found that building one new ground-up residential home can be as challenging as doing an entire multi-family project.
But the ability to start at a higher real estate asset class depends on your financial means.
What is your starting point? Are you a single investor with $30,000? Or do you have a real estate partner with similar interests who can bring something to the table to invest in a larger investment deal?
An even larger network and team could provide you with the ability to get into a larger real estate asset class more quickly and could even facilitate you getting into real estate full time.
Do not get discouraged if you don’t have the resources to jump into a major real estate investment project in the beginning. You can always put that aspiration into that list of real estate investment goals you are writing down (you are writing them down … right?)
Call us today to learn how to get the lowest loan rates!
Quick-Tips for Determining Your Real Estate Investment Game Plan as a Borrower
Having your real estate investment goals set will help your real estate funding lender understand more about where you are going, and how best to help you.
If you are not sure how to set your goals, here are my suggestions:
- Take your time.
- Put a lot of thought into it.
- Ask a lot of questions.
- Read a lot of books.
- Talk with several types of real estate funders about their services.
- Talk to appraisers.
- Talk to builders.
- Reach out to real estate mentors who are well-versed in investment asset classes.
- Connect with others in the real estate community through local meetups, BiggerPockets.com, etc.
By asking yourself these three questions—why are you in real estate, what real estate asset class do you want, and what are your financial means—as well as doing your research, you can have an educated conversation with your real estate investment lender when the time is right.
This will help both you and your real estate funder get ahead of your real estate investing game to make the most of your time and your money right out of the gate.
OH, THERE’S MORE – MUCH MORE!
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