So You Say You Never Wanted To Be In Business For Yourself....

Real estate investing.... What comes to mind? Donald Trump? Fun trips to Home Depot? Fear? Unruly tenants? Lots of money? More fear?

Well, I think the biggest surprise to most people who venture into the real estate investment game, at ANY level, is the obvious fact that they're now running a business. Problem is it's never that obvious until they're a bit into things and it dawns on them, perhaps by the hammer of their accountant, that they're running a business and need to manage it as such. And that, my friends, is where the fun ENDS for many!

Yup, flipping houses is gobs of fun. Turn on any flipping show, Flip This House, Flip That House, you name it, and what you see, for the most part, is fun and games. Here's the reality: budgets need to be managed; accounts need to be opened and maintained; contractors need to be managed; paperwork — tons of paperwork, from licenses, to permits, to contracts, to receipts, to mortgages, to tax returns.... Should I stop? There are tax ramifications — do I act as a sole proprietor, form an entity like a C-Corp, S-Corp or LLC? Where can I get credit? Who can I trust? Who will do the physical work? How do I know I'm not getting ripped off?

Yes, real estate investing is a business, whether you're doing it as a side thing, full time, or just as a hobby. You're gonna encounter contractors who aren't running their business as such who will cause you a lot of grief (ever hear of something called a mechanic's lien?); city inspectors who will toy with you; banks (my generic term for money lenders) who will make you cry; tenants who you'd like to make cry; and houses that will make you wish all you were doing was crying!

There is still money to be made buying, selling, renovating, and holding property, obviously — it is still the best investment vehicle there is — just do it with the blinders off and knowing what you're really getting into. And be as prepared as you can, because anything that can, will, go wrong.