If you study wealthy people and the things they pursue financially and professionally, you’ll typically find yourself in a real estate rabbit hole. Real estate is one of the preferred methods for accumulating and growing wealth. 

In particular, successful people are often drawn to rental properties. And while it’s an extremely lucrative way to invest, there are some things you should know before getting started.

5 Things They Don’t Tell You

Real estate investing is potentially lucrative, but it’s not for the faint of heart. To succeed, you’ll need to equip yourself with the facts. Here are a few that you won’t hear just anywhere:

• It’s All About Cash Flow

When buying a personal residence, most homeowners are thinking about value from the standpoint of how much appreciation they can expect between the time they buy and the time they plan to sell in the future. But with a rental property, appreciation isn’t the goal. Cash flow is what it’s all about.

When running the numbers on a rental property, focus on how much monthly cash flow you generate as a percentage of the equity you have in the property. This is known as your cap rate. Any appreciation that occurs is just icing on the cake. 

• You Don’t Want to be a Landlord

You want to be a real estate investor – not a landlord. What’s the difference, you might ask? A landlord manages the day-to-day operations (and problems) of the rental property, while an investor is usually uninvolved after the initial investment.

The key to being a hands-off investor is to hire a property management company to handle all of the day-to-day issues, like screening tenants, collecting rent, scheduling repairs, and keeping the books.

• Avoid Buying With Friends

To divest risk, many people will partner with a friend to invest in a rental property. And while this sounds good in theory – sharing in the down payment and risk – it’s usually more trouble than it’s worth.

When you own a piece of real estate with a friend, you have to be 100 percent on the same page. One person might want to use all of the profit to pay down the mortgage, while another might use it for personal income. There may be disagreements on how long to hold the property. If a major repair is needed, it might be hard to agree on which route to go. No matter how good of friends you are, things can get sticky in a hurry. It’s best to invest on your own and preserve the friendship.

• Rental Properties are Recession-Proof

Now for some good news: Rental properties are one of the few recession-proof investments in the world. While home values might suffer, people always need a place to rent. If anything, more people will sell their properties and find rentals. This creates steady demand that continues to rise in the face of turmoil. So if you’re looking for a place to shelter some of your wealth in uncertain times, rental real estate is a great choice. 

• Expenses Are Higher Than You Think

It’s not as simple as calculating the property taxes and mortgage payment and subtracting those numbers from the rent payment you collect each month. There are lots of hidden costs associated with owning a rental property. If you don’t account for them, your cash flow could be much lower than you’re anticipating.

As a general rule of thumb, you should assume that your costs will equal roughly 50 percent of your gross annual income from the property. So if you generate $2,000 in rent per month ($24,000 per year), you can expect expenses to be roughly $12,000 per year. This obviously isn’t a perfect calculation, but it gives you a conservative estimate.

Gather the Facts

Real estate investing is one of the best ways to build wealth. You won’t find very many people who will argue that fact. However, it’s important that you go into the investing process with the right mindset. There are good parts, as well as very challenging aspects. 

Once you understand the basics, you’ll be able to make smart and calculated decisions.

It’s tough to be a real estate agent in the modern era. Despite a flourishing real estate industry, the sheer amount of competition makes it hard to stand out, earn new clients, and sell homes in a prompt and professional manner. 

In fact, not long ago, there were more active real estate agents in the United States than there were listed homes for sale.

So what does it take to be better? What do you have to do to outcompete your greatest competitors?

Prioritize Your Clients

One of the most important things you’ll need to do is prioritize your clients. As a real estate agent, your clients are everything. If someone isn’t happy with your services, they’re going to leave. If they walk away thrilled, they’re going to recommend you to everyone they know. Over time, better client relationships are going to lead to a better reputation, more visibility, and of course, better results.

So what does it take to serve your clients better?

•         Improve your communication. Everything starts with better communication. It’s important to have concise, articulate conversations with your clients and respond to them as quickly as you can. If they ask you a question via email, try to get back to them with an answer within a day. If they call you, call them back as soon as possible and listen to what they have to say. These communication fundamentals may seem straightforward, but they’re the key to establishing your presence in the real estate world.
•         Focus on relationships. Similarly, it’s vital to focus on the relationships you build as a real estate agent. These aren’t just random people you’re helping to buy or sell a home; they’re your clients, and you want to take care of them. Learn about their values and perspectives and treat them as you would a friend; they’ll be much more inclined to rate you favorably and recommend you to others as a result.
•         Understand and speak to pain points. Work to understand your target demographics and speak to their pain points. What are the common problems faced by clients like yours in this area? Do you have a solution that other real estate agents don’t?
•         Remain flexible and accommodating. This should go without saying, but try to remain as flexible and accommodating as possible. Scheduling that showing may make it difficult for you to accomplish the rest of your priorities for the day, but it could be the one your clients want to buy.

Use a Variety of Marketing Channels

Marketing is a vital skill of real estate agents. You need to be prepared to both market the properties you’re listing for sale and market yourself to find new clients. To succeed, you’ll need to lean on a variety of marketing channels.

For example, one of the best ways to raise the visibility of a luxury property are just listed postcards. Combined with digital ads, email marketing, and other tactics, you can make a huge impact with almost any target audience. For yourself, social media marketing is one of the best modern strategies to improve the reach of your personal brand.

Figure Out What Makes You Unique

There are millions of real estate agents in the United States. So what makes you unique? What can you do that others can’t?

If you want to be competitive, you’ll need an answer to this question. If you’re new to the game, you’re not going to beat people based on experience or knowledge of the area. So what can you offer that’s unique to you? Spend some time figuring out your unique value proposition (UVP) and bringing it to the front of your personal marketing efforts.

Connect With Other Real Estate Agents

This may seem counterintuitive, but one of the best ways to beat your competitors is to connect to them directly. Spend time networking and getting to know the other agents in your area. You may even want to shadow them occasionally. At worst, you’ll figure out what you’re up against, so you can devise strategies to beat them. At best, you’ll learn the critical strategies and tactics you’ll need to succeed – and tap into the power of a robust support network.

Get Lots of Feedback

Finally, make sure you get as much feedback as possible. Talk to your mentors, your peers, and of course, your clients to get a better perspective on how you’re working and what you might be doing wrong.

If you’re new to being a real estate agent, don’t count on rising to the top overnight. Improving your personal brand and client relationships is a process that takes years. 

Just keep investing in yourself and tweaking your approach until you find the right niche and strategic focus. 

As a landlord, keeping your properties leased is one of the keys to maintaining strong cash flow. And while some vacancy is normal, extended vacancies can leave you in a financial hole. Figuring out a system to keep tenants in your properties will benefit you tremendously in the years to come.

7 Tips for Filling Your Vacancy

When you invest in a rental property, it’s always a good idea to account for some vacancy. One month per year is a safe number in most markets. However, your goal should be to keep your property rented for as close to 365 days per year as possible.

When your property is vacant and you have no tenant lined up, here are some suggestions you can use to get the unit filled:

1.Outsource to a Property Manager

The easiest option is to outsource your property marketing and tenant acquisition to a property management company. These companies have connections and, depending on the setup, are incentivized to help you find the best possible fit. They don’t get paid if you don’t get paid!

2.Use Word of Mouth

Ideally, you want to fill your vacancy without having to go through the painstaking process of creating a listing, investing in marketing and advertising, collecting applications, and screening a bunch of people. In a perfect world, you simply reach out to your network (which includes both personal and professional connections) and let them know that you have a vacant property. This is the most cost-effective option.

3.Leverage Social Media

Social media is another great place to get the word out. The beauty of using a platform like Facebook is that other people in your network can tag and share. This amplifies visibility and allows you to reach more people without any additional effort. 

4.Put up Signs

Even in a digital age, there’s still immense value in putting a “for rent” sign in the yard. This is especially valuable if your property is located on a road that gets a lot of traffic. With the right visibility, you can easily find a tenant within a day or two using this approach. 

5.Use Free Online Classifieds

There’s no need to pay for an expensive ad placement. There are plenty of free online classifieds where you can post your listing and drive qualified leads directly to your application. Facebook Marketplace and Craigslist are the obvious places, but there are plenty of niche and local platforms, too. 

6.Optimize Your Listing

When prospective renters are looking through listings, they’re trying to be as efficient as possible. They aren’t going to spend 10 minutes with every listing they run across. They quickly scan and move on. And that’s why your listing should focus on a few key elements:

• An eye-catching title that’s descriptive and compelling
• Descriptive language that discusses the key points of the property
• Lots of high-resolution images that show each room from multiple angles.

While there’s an art to developing well-optimized listings, you don’t have to become an excellent copywriter overnight.

“Fortunately for all of us, these things don’t need to be creative or overly unique,” expert Kasia Manolas writes. “They just need to give the tenant what they’re actually looking for. And once you understand what tenants are looking for, it’s really just formulaic.”

Review the rental property listings in your area and then study the ones that find tenants within a matter of hours. You don’t have to reinvent the wheel – just copy these formats and tweak them to your property. 

7.Ask Existing Tenants

If you own other rental properties, get in touch with your existing tenants and ask them if they have any referrals. You might even incentivize them with a discount on their rent if they send you someone who ends up signing a lease agreement.

Find the Right Tenant

The right tenant can be difficult to find. And in the heat of the moment, when you feel the pressure to put someone in the unit, it’s easy to make a poor decision. Be careful not to rush into a decision. Take your time and remain disciplined. It’s better to wait an extra week or two for the right person than to rush into a lease agreement with someone who will create headaches for months to come.