6 Biggest Pain Points of a Real Estate Investor and How to Solve Them
Real estate investors expect more stability and a better ROI as they start hunting for various investment methods in the industry. Today, real estate investment is way beyond just buying and selling properties. Investors can start with multiple modes of real estate investing, such as REITs, Real Estate Syndications, and Mutual Funds.
The financial goals, investment capacity, and the nature of work as a real estate investor may differ from investor to investor. Some may be accredited investors with a high net worth and a considerable investment capacity, while some millennials may be looking for investment opportunities as passive investors.
This article takes you through the six most significant pain points of a real estate investor and some pro tips to solve them. We hope you will relate to the pain points expressed here, and the information will help you resolve them to help you make better investment decisions.
Let’s drill down the six most significant pain points of a real estate investor:
- Strategizing Financial Goals
The first and foremost pain point is to choose an investment path after deciding where exactly you want to go in your real estate investment journey. Many aspiring investors find it difficult to set their financial goals. Your success story in real estate investing begins with a crucial element — setting your financial goals.
The best way to resolve this pain point is to align your financial goals with your investment capacity. Can you go ahead and purchase property individually? Real estate syndication can be the perfect investment method if you want to start with a small amount of money.
You invest the promised amount of money in a real estate syndicate and get consistent returns as your passive income. Real estate syndication is a long-term investment, as the holding period may be 5 to 10 years. You also get a profit share in capital gain when the syndicator sells the property at a better price.
2. Finding Appropriate Real Estate Deals
A real estate investor may be confused about choosing the first deal to invest in. There are numerous ways to invest in real estate. You can start with mutual funds that further invest their funds in real estate projects. Another option is Real Estate Investing Trusts.
Beginners and non-accredited real estate investors can start investing in a real estate syndicate to resolve this pain point. Your sponsor explains the deal to you; you commit an investment, make a soft commitment by paying a small amount upfront, and transfer your promised funds on or before the mutually agreed date.
In return, you get your profit shares periodically. You don’t need to worry about property management, administration, finding tenants, and paying taxes. However, you earn a consistent passive income based on your contribution to the initial capital investment.
3. Choosing the Right Mentor
When you choose to be a part of the pool of investors, it may be challenging to select the best mentor to guide you through your real estate investment journey. Online courses, webinars, and books may help you understand the industry. However, these learning assets don’t guide you when choosing the best investment opportunity.
The best way to resolve this pain point is to participate in a real estate syndication as a passive investor. You will not be the decision-maker and won’t be involved in the day-to-day administration of the property. However, you can freely communicate with your syndicator to understand the technicalities and benefits of real estate investing.
4. Investment Capacity Vs. Portfolio Diversification
It is well-known that diversifying your real estate investment portfolio takes you to stability, as you will earn through multiple sources. Similarly, portfolio diversification will assure good returns irrespective of the economic slowdown. However, the pain point for a real estate investor is how to diversify your portfolio with a smaller investment capacity?
Being a part of a real estate syndication as a passive investor gives you the freedom to invest in multiple real estate deals across property classes, property types, and locations. Thanks to online crowdfunding that accelerates the fundraising process and lets you split your total investment across multiple real estate deals.
Switch to the best real estate syndication software, like SyndicationPro. The investor portal allows you to access multiple real estate offerings. You can glance at the offering details and invest in numerous deals by communicating with the respective syndicators.
5. Barriers to the Best Possible ROI
Every real estate investor expects the best possible ROI. However, several crucial factors, mainly expenses, limit your returns. Some significant expenses are:
- Cost to upgrade amenities in a property
- Cost for the upkeep of a property
- Applicable taxes the owner is liable to pay regularly
- Vacant residential units in a multifamily asset for a long time
- Marketing and administrative costs
An individual property buyer has to bear these costs on his own. However, in a real estate syndicate, the expenses are divided among investors and deducted from the gross profit. Then the syndicator distributes the profit shares among investors. Therefore, participating in a real estate syndication will be a safe game in the long run.
6. Uncertainty About Appreciation
After an adequate holding period, a real estate investor expects lucrative appreciation. However, the appreciation or rise in the property price is subject to different market scenarios at a particular time. Finding a buyer to sell out a property at a better price may take more time than anticipated in the beginning.
Real estate syndicators have extensive experience in managing investments. They usually work out various exit plans at the right time. For instance, if it is impossible to sell the commercial property at a better price, the syndicators may plan to repurpose the asset to gain better rental income.
To Wrap-up
The article covers a real estate investor’s six most significant pain points and some pro tips to resolve them. We hope that the various aspects of real estate investments covered in this article will help you refine your perspective and effectively address the pain points by implementing the solutions.
