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. 

Investing in property and becoming a landlord is one of the best ways to make money. With the right property and good tenants, you can reliably generate income every month – and with a few properties in your portfolio, you might be able to collect enough to fund your retirement. You can also benefit from the long-term growth in your property’s value.

The one drawback is that, as a landlord, you’ll have many responsibilities to handle. You’ll have to find new tenants for a vacant unit, screen tenants, collect rent payments, follow up on late payments, respond to requests, issue maintenance and repairs, and even manage tenant evictions (in bad situations).

If you’re not careful, managing your property could take up a ton of time – and jeopardize the profitability of your entire operation. So what are the best ways for landlords to save time every day?

How Landlords Can Save Time

Use these strategies to save time and keep your property running smoothly:

1.       Find a consistent rental application. One of the most difficult and time-consuming things you’ll have to do as a landlord is find new tenants for a vacant property. But you can save time and make things simple once you find a solid rental application. With a consistent, thorough rental application in place, you can collect the same information from all your tenant applicants and review that information more thoroughly. Not only will this help you keep your paperwork straight, but it will also help you find better candidates for your property.
2.       Screen your tenants carefully. Collecting information is valuable, but it’s also important to verify that information. Tenant screening is a time-consuming process, but in the long run, it can actually save you time. Check your candidate’s credit score, job history, current job, current income, criminal history, and other factors to make sure they’re a good fit for this property. If it doesn’t seem like they can afford to pay rent consistently, you can reject the application and move on – sparing yourself countless later headaches.
3.       Create an airtight lease agreement. Your latest applicant may have gotten through your screening process, but before you immediately bring them in, make sure they review and sign a thorough, airtight lease agreement. It’s a good idea to work with a lawyer to draft and improve a lease agreement that protects your interests and prevents misunderstandings in the future.
4.       Automate rent collection and follow-ups. If you’re still manually collecting rent from your tenants and cashing physical checks, you’re doing something wrong. You can save hours of time by simply transitioning to an automated system of rent collection. With automated withdrawals, your tenants will save time, you’ll save time, and your incoming rent payments will be more consistent. There’s no reason not to change.
5.       Work with a partner and split responsibilities. If you’re overwhelmed with your responsibilities as a landlord, one option is to partner up with someone and split the duties. If you know another property investor in the area, you can split the profits and split the work evenly. It’s not the ideal arrangement for everyone, but it could easily save you time.
6.       Inspect and maintain the property regularly. Taking the time to inspect the property and maintain it efficiently can spare you a lot of effort in the future. It’s almost always better to spend time and money proactively preventing issues than to respond to problems once they’re already fully developed.
7.       Communicate efficiently. Some landlords waste a lot of time because of poor communication. They don’t respond to tenants promptly, they don’t set proactive expectations, and they allow conversation threads to drone on inefficiently. Instead, be as concise and clear as possible in all your outgoing messages and set expectations with your tenants for how they should be communicating with you.
8.       Hire a property management company. If you find that property management is taking over your life, it may be in your best interest to hire a property management company. You’ll pay a fixed percentage of your gross rent for someone else to handle the day-to-day operations – and you can sit back and collect the profits hands-free.

Improving Upon Your Existing Process

Many landlords suffer simply because they’re unwilling to change. They know that they’re spending more time than they’d like on managing a given property, but they don’t do the work necessary to understand the root causes of that time loss – nor are they willing to tweak their approach to make things better.

Instead, you have to be proactive and keep improving on your existing processes. Track your time, analyze your habits, and keep looking for new ways that you can increase your efficiency or save time and effort. With a bit of extra awareness, you’ll be amazed at what’s possible.