Category: General Real Estate Advice

How To Know If You Are Ready For Real Estate Investing

Real estate investing is an excellent strategy for long term wealth accumulation, but how do you know if you’re ready?
In a nutshell, you’re going to need some cash reserves and a good strategy that works for you. There are tons of real estate investment strategies and it’s easy to get overwhelmed. But narrowing your focus can help you get started on the right foot.
Here are the top three things that will tell you whether or not you’re ready:

  • You have access to cash
  • You know which kind of investor you want to be
  • You have a strategy

How Much Cash Do You Need for Investing?

Contrary to popular belief, you don’t need a ton of cash on-hand to begin investing in real estate. Many investors actually prefer to take out loans from private lenders rather than using their own cash. It all depends on your financial situation, your credit score and your level of comfort with taking risks.
Here are some of the key considerations to help you decide whether or not you’ve got enough cash in the bank, or good enough credit to find a lender.

Are you in survival mode? Living paycheck to paycheck can be a tough situation. Or maybe you’re not quite in the “living paycheck to paycheck” spot, but you make just enough to pay your bills and start digging yourself out of debt. This is a normal and commendable place to be. But it’s not likely a great place to start investing just yet. Focus on getting to a comfortable spot first, unless you can qualify for a loan

What do your reserves look like? Do you have cash reserves in the bank? In general, you want to have $1,000 in an account for a rainy day fund. This is for emergencies and unplanned expenses. Beyond this, it is wise to have about 6 months’ worth of bills saved up for the property you want to purchase. If you’re looking to purchase a rental property with a $1,000/month mortgage, you want to have at least $6,000 in the bank.

Passive vs Active Investing

Investing in real estate can be as much or as little work as you want it to be. Some investors really want to be hands-on while others don’t have the time or the interest in doing so.
Let’s talk about the specifics so you can make the best decision for you.
Passive Investors make monetary investments in properties without getting involved in the decision-making, negotiations, etc. For example, when you invest in the stock market, you don’t get involved in the daily operations of the companies in which you invest. You simply earn some dividends when the company does well.
Passive investing is similar. People who invest passively in real estate typically do so in one of three ways: the stock market, crowdfunding or partnership.

  • The Stock Market is a quick and easy way to invest in real estate without getting involved in construction, fixing and flipping, negotiating deals, etc. But you still have to do some research on which funds and REITs to invest in. There are some great resources available for this, but I usually prefer to talk to successful investors. They are already doing it, so why not buy them a cup of coffee and pick their brain for great ideas?
  • Crowdfunding is a scenario in which a professional investor identifies a property to renovate into a hotel, multifamily unit or other such entity. If the investor doesn’t quite have enough capital to make the purchase, they may look for private investors to assist in that area. If you invest in it and it does well, you will receive a portion of the profits.
  • Partnership with an active investor is another great way to get involved without doing a ton of work. Much like crowdfunding, partnering with another real estate investor who actively purchases rental properties can generate some income for you, as well. In this type of partnership, you can partner with the active investor to purchase the properties and then you share the profits in a way that is proportional to the work you put in. So the active partner will likely receive more of the profits, but all you did was invest a little money on the front end, so it’s worth it.

If you already have a full-time job that you enjoy and that allows you to live your preferred lifestyle, passive investing is likely a great option for you. Depending on how much cash you have to invest, you can really build a nice portfolio.
There are downsides to everything and this is no exception. In passive real estate investing, you need to make sure that the stocks you purchase or the partners you choose are reputable. Make sure they are purchasing properties in a viable end of town. Do the research on the projects they are working on before putting in any money!
Active Investors are involved in the identification, purchase and/or management of the real estate in question. The simplest example of this is a person who flips houses. They find a home that they think will be a good investment, put in an offer, purchase it, renovate it and then sell it (hopefully) for a profit. Although there is a lot more that goes into the process, this is a good illustration of active investing.
Another example of active investing is to purchase rental properties. In this scenario, you purchase a rental property, find a renter and allow their monthly rent to serve as an income source for you. Many of these investors hire property management companies to take care of the logistics of finding, renting, getting contractors to do repairs, etc. But it is still much more involved than passive investing.
Some of the key benefits of active investing are control over the situation and the opportunity to make more money in a smaller amount of time. If you are the one purchasing and managing the property, you are relying only on yourself to make good decisions, rather than a company, a partner or a large real estate investment firm. You also have the opportunity to flip the house quickly and make a fast profit.
This type of investing typically requires a higher toleration for risk.

Developing a Strategy

Once you decide what kind of investor you’re going to be, you will need to develop a strategy on how to make it a successful venture. Your strategy can change drastically based on your available/accessible cash.
Strategies for Passive Investors
If you’ve already decided that you’re going to be a passive investor, you need to develop a plan that makes sense for you. Real estate investments via stocks, bonds and REITs are a great place to get started.

What is a REIT? I’m glad you asked!
REITs or Real Estate Investment Trusts are companies that own and manage income-generating properties. These include residential properties like apartment buildings and condos, as well as non-residential properties like hotels and shopping malls. These companies share their profits proportionally with their investors on a quarterly or annual basis.
Some REITs are publicly traded while others are non-traded. It is helpful to discuss your options with an investment broker to help you choose which ones are best for you.
So let’s talk about next steps.
Step One:
To invest in stocks, bonds and REITs, start by identifying a broker you want to work with or an online brokerage that you trust. It pays to do your research and find one that has a similar philosophy to yours and a fee schedule you can live with.
Step Two:
If you’re working with a broker, you’ll want to schedule time to sit down and talk about your goals. Tell them why you want to invest, how much available cash you have and what your ultimate goals are. Your broker will discuss the various options and assess your tolerance for risk. From there, the two of you will build a plan.
If online brokerages are more your speed, there are tons to choose from.
Step Three:
After developing a plan with your broker, it’s time to take that leap! Whether you have just a small amount to invest at the beginning, or a much larger sum, now is the time! As you become more confident with your investments and returns, I think you will find it really gratifying to invest in this way.
Note to self: Crowdfunding is a much bigger world. It is a type of investing that is typically reserved for accredited investors. If that’s you, then go for it. If not, perhaps it will end up on your real estate investment bucket list.

Strategies for Active Investors

As an active investor, there are several ways to jump into the real-estate business. But let’s consider how your available cash affects your strategy.
If you’re in survival mode right now, it might be best to focus on real estate as a side-hustle or even a job, rather than an investment. Simply put, you need more money coming in right now, rather than going out. There are a variety of full and part-time opportunities in real estate that will get you involved in the industry and making connections, while putting more cash in your pocket. Leasing agents, real estate agents, property managers, appraisers and other such jobs are a great way to get into it without investing just yet.
If you have plenty of cash available to invest, there’s no better time than the present to start doing it! If you’ve identified yourself as an active investor, start looking for your first fix-and-flip or rental property. It’s important to know whether you want to flip it or rent it out before you purchase a property. These two types of properties will look very different. One will be a “fixer upper” while the other might already be in great shape and you’ll just need to find a renter.

Fix and flip investments are a great way to make a profit quickly, assuming you’ve done your homework on getting a great price, doing the renovations and then listing and selling it. You need to consider what your ROI will be once it’s all said and done.
In the fix and flip world, the faster you get it done, the better. You don’t want to hold onto these properties for too long because you’ll end up paying the mortgage until it’s sold. After all, you OWN it…
Rental properties are a completely different animal. With these types of investments, there is generally a lot more risk involved. Again, you need to do some homework on the potential ROI of a rental property. You’ll need to be confident that you can rent it at a price that will give you a positive cash flow each month. To create a positive cash flow, you need to consider all expenses that are tied into owning the property.
For example, if you purchase a rental home with a mortgage of $1500/month, an HOA of $200/month and a property management company of $150/month, you’re looking at $1850 per month plus maintenance and upkeep if it’s not covered by your management company. So you’re looking to rent it out for $2200-2500/month or more in order to make a profit each month.
Of course the math is much more complicated than that, but you get the picture.


Real estate investing is an exciting and sometimes scary world. But doing some research on the front end and answering the simple questions above will help you get started off on the right foot. A great strategy and a business plan will give you great peace of mind and the confidence to take the first step.
So what are you waiting for?

Picture: Pixabay

Using a Real Estate CRM

As a real estate investor, you will analyze dozens of properties a day at least. It’s going to be crucial for you to establish a system of organization to track your leads and the progress you make on each lead. One way to maintain a high level of structure is to invest in real estate CRM software.

CRM stands for customer relationship management. CRM software is a helpful tool for many different types of businesses, including real estate investing, to keep track of their contacts, leads, and other important information related to their everyday tasks. It helps keep a team on track and aligned with their goals, and it provides a visual workflow of your work. For real estate investors specifically, the CRM software could follow a lead from the point of first contact all the way through deal closing, and even further along to leasing or resale.

CRM software also stores a wealth of information related to each lead. For real estate investing, this could mean any of the following fields related to a specific deal: agent contact information, property location, property details, purchase price, resale value, appraisal value, inspection results, contracts and addendums, tenant screening documentation, rental lease agreements, title company information, mortgage details, property management fees, offers and counter-offers, and much more.

CRM Options

A quick web search will provide you with a multitude of CRM options related to real estate that you can customize and build to your specific business needs. Some of the better-known CRMs for real estate include Top Producer, Lion Desk, and Follow Up Boss. Each of these CRMs have unique features that could serve different aspects of your real estate investment business.

For example, as a real estate investor, you scour through dozens of properties a day at least. You analyze the property, the neighborhood, and the financial aspects of each new lead, and you need somewhere to track all of this information. You need to be able to pull up these details at a moment’s notice, and they need to be accessible from anywhere since you’re often on the go. You’re also constantly looking for tenants, contractors, title companies, and other professionals near the property in question, so it would be helpful to have a tool where you can set up drip campaigns – scheduled email communications that have customizable messages and parameters. You come across dozens of people a week that could be helpful contacts for any aspect of your real estate investing business – fellow investors, business leaders, property developers, lawmakers, and mortgage brokers. You need a solid address book to maintain their contact details and specific notes – and maybe even a picture so that you can better remember your contacts before an in-person meeting. A quality CRM software can do all of these things and more!

Alternatives to a CRM

If you feel that your volume of business doesn’t substantiate the cost of a CRM or the time it will take you to train yourself on the CRM, there are a few notable alternatives.

The first, of course, is good old pen and paper. There are surely many real estate investors who prefer to maintain their business on notepads and index cards. The drawbacks to this method are obvious, in that it can be difficult to stay organized and you are limited as to how much information you can reliably maintain. You also lose the technological capability of automated reminders and the mobility of the product. Sure, you can carry your notes around wherever you go, but what happens when you spill coffee on the only version of meeting notes you took when you met with that important real estate developer? You don’t have the benefit of automated backups that you have with electronic record-keeping. On top of that, you severely limit yourself as to how much business you can take on, as you have to maintain all records by hand. This method can lead to unreliable record-keeping, not to mention the fact that if you were ever audited by the IRS or any other governmental organization, it would be very difficult to prove the legitimacy of your business if all records are kept on paper.

A more advanced, but still imperfect, method of record keeping is to use a software like Microsoft Excel to track your leads and deals. You can use a calendar software like Microsoft Outlook to set appointments and schedule reminders. You can also use products like Microsoft Word and Microsoft PowerPoint to draft marketing materials and include them in your scheduled drip campaigns. Of course, managing your real estate investment business across a number of different software products could prove to be difficult and cumbersome. You, again, rely on your manual entries and updates and forego the benefit of having an automated system that remembers to take certain actions on all of your leads, instead of just those that you remember to update.

Another alternative to purchasing a CRM is to utilize their free trial version. Many CRM software companies offer a free trial of their product on their website in order to market their service and generate interest among a wider group of people. This could be a great way for you to have a “test run” of multiple products in order to decide which one suits your needs best. It’s also an opportunity to test out the support services of the company to answer your questions, give you tutorials, and just provide overall support to you and your team if needed. The drawback to this method is that you may be limited as to the range of services the company provides for their free trial product. It may suit your current needs, but as you grow your real estate investment business you may require greater functionality and/or storage space. These are just a few of the considerations you will encounter if you use free trial CRM software products.

Benefits to a CRM

There are numerous benefits to utilizing a CRM for your real estate investment business. For one, it provides a centralized location for you to track the data and extraneous information for your potential deals. At any one time, a prudent real estate investor may have a dozen or more properties on their radar. A CRM software helps keep you organized and structured as you navigate the waters of the real estate industry.

Real estate contracts have deadlines and lifecycles and missing one of these important dates could be deadly to your deal – and your wallet. By tracking each of these dates in your CRM, you’ll be reminded before every major deadline which greatly reduces your chances of letting one of these meetings fly by unnoticed. You can schedule automated emails to be sent to follow up with your title company, for instance, just to get a timely update. You can set up a marketing campaign to be sent to potential tenants when you buy a new rental property. You can track the dates of rent payments against the dates they were due to better understand your collections lifecycle. The tools available in any CRM software are far greater than the functionality you could maintain if you were handling your business by hand.

Another benefit of using a real estate investment CRM is that you improve your records retention for purposes of resurrecting old leads and for audit purposes. If you come across a property that seems to be a great investment opportunity, but the price is just a bit too high, you could schedule a reminder within your CRM to follow back up on this lead 6 months down the road when the market may have taken a downturn. If you were managing your leads on paper or in a spreadsheet, you wouldn’t have the benefit of automated reminders. You probably also wouldn’t have kept all of your notes related to that property in one central, easily accessible place. Moreover, if you were ever audited by the government or needed to provide business records to a bank or any other authority, having all of your records maintained in a CRM greatly reduces the hassle needed to gather the pertinent information.

Drawbacks to a CRM

One common drawback to a CRM software is that you might find yourself in what investors commonly refer to as “analysis paralysis” – this is what happens when you are presented with so much information that you cannot determine what is important and what isn’t, and you end up taking no action at all. This is common with real estate investors who are just starting out, because investing can be incredibly risky and confusing if you are not properly educated. Much of real estate investing is predicated on your inherent understanding of a property’s location and ultimate potential, so if you are overwhelmed by the details in your CRM specifically related to financials, you may overlook some promising opportunities.

Another drawback is the fact that, in order for a CRM to be most useful to you and your real estate investment team, it needs to be utilized consistently and accurately. This requires you and your team to be diligent about recording information about your leads, ongoing deals, and long-term opportunities. It requires fact-checking and it means that you need to trust yourself and your team to enter accurate, timely information on a regular basis. It also means that they need to update this information in real-time should things change, as things tend to do very often in the real estate world.

The final major drawback to using a CRM software could be the cost. It’s important for you to shop around to understand which product features are a necessity and which are a luxury that might not warrant the extra cost. For example, if you operate as a solo real estate investor without a team, it probably does not make sense for you to pay for the extra support package that offers unlimited support members to serve your team. You could probably get by with using the free help center, or at the very worst, paying per instance to the company’s in-person support team. It all depends on what the company offers but be sure to analyze the price of the software against all other expenses you incur as a real estate investor. The real estate CRM should be a tool that enhances your productivity and expands your reach, not a tool that costs a fortune but barely gets used.

Tips and Tricks

The first trick to having a CRM software for your real estate investment business is to actually use it! This will take time and, of course, discipline, but your business will reap the rewards. If you are consistent, you’ll find that the CRM soon becomes irreplaceable, a treasure trove of information for your real estate investment business that you can’t imagine working without. It will become a crucial part of your business, but only with time and practice. It will naturally take time to uncover all of the great functionality that is offered with your CRM software, but these features will become integral parts of your day-to-day functionality. Each software is different, so be sure to check out all of the unique features that yours provides.

The second trick to having CRM software for your real estate investment business is to take advantage of the CRM’s support center. Many CRM software products offer a support center full of virtual trainings, webinars, how-to articles, and tutorials. These can be invaluable when it comes to learning how to use your new CRM software, and this section of the software should not be overlooked.

If the scale of your real estate investment business is large enough to warrant having a team or partners, the third trick to having a CRM software is to train your team to use it. Their knowledge is likely just as relevant and important as your own, and you should aim to get as much of their knowledge out of their heads and into the software. This will come in handy when deals are being transferred from one hand to another in that the person working on the deal at the current moment has the benefit of reading the deal history in the CRM.

Now that you understand the importance of maintaining a system that works for you and helps keep you on track, it’s imperative that you choose a method you are comfortable with and implement that system in your everyday life. It is very easy to get wrapped up in the excitement of new software, with all of its bells and whistles, only to find months later that you aren’t using the product as intended. It will take discipline and time, but over time you will find the benefits of using a real estate CRM software far outweigh the drawbacks. Take advantage of your newfound organization and scale your business up today!


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