How to Get Yourself in the Right Business-Buying Mindset
Getting involved in real estate investment is a major decision and can be both a great boon to some investors and a hardship to less successful investors. There would assuredly be difficulties during the investment process, not to mention the considerable time investment any project requires. Yet, even with all those possibilities, some investors don’t take the right mindset into a potential investment opportunity.
Buying an investment property, specifically an income property, is akin to buying a business. You must manage revenue and expenses. You fire people (evictions), hire people (recruit new residents), and guide your mini-organization to a profitable system. If you were to phrase investment as buying a business, more people might be apt to take it more seriously. Buying a business carries a few defining characteristics that also describe investment projects.
The Potential Of A Business
When an individual purchases or starts a business, the sky is the limit for the potential of that entity. At the onset, before all of the complication and hard work begins, a company has the ability to turn out as an innovative organization with a clear, profitable direction or the ability to turn out as a dud, languishing in mediocrity, struggling to break even.
Think of your income property purchase the same way. When you buy it, odds are, you have the potential to affect real change in the way it is run and the profitability it sees, provided you have done your homework correctly. I realize that is a big caveat as there are many investment opportunities that are simply doomed before they are purchased, but let’s assume that you have at least a break-even project on your hands to start with.
Early decisions of a business go a long way towards determining the long-term prospect of a company and so, too, do the early decisions you face with an income property. If you price your property too high, you will develop a reputation as too expensive and struggle to win people back even with a price reduction. If you price too low, you will be faced with rent payments that don’t fit your business model and the prospect of being locked into a losing situation for the term of a lease.
The Time-Sink Of A Business
Most anyone would agree that running a business is a time-consuming task and many start-ups function only on the amount of hard work the owner or founder is willing to put in initially. If you take that approach to your start-up real estate income property, you will be well served. Putting in the work yourself to improve the property, market it and sell to potential customers, you will reap rewards for yourself and for your own mini-corporation.
Business ventures simply take a lot of work and income properties are no different. After you have attracted residents, you still need to tend to problems, fix a water heater here or there, develop a system of suppliers and maintenance professionals to service your building, and basically maintain the best possible quality of life for your tenants to ensure continued rent checks in your mailbox.
While few investors get into real estate investing thinking it will be a simple walk through the park, many don’t realize the kind of effort it takes to purchase, get up to speed, and maintain an income property. Putting a more business-like face on the process may help those investors realize that it is not only a great investment in monetary terms but a great investment in time terms that will reward a real estate investor that takes it seriously and provides the necessary effort.