Many entrepreneurs are investing in real estate business due to the opportunity it offers. Real estate provides passive income to entrepreneurs hence, allowing them time to focus on other businesses while making money from the real estate. The great thing about real estate is that even in a bad economy, it will usually fare better than stocks. Real estate will continue to appreciate despite occasional slow-downs in the economy. Real estate has been proven to be the best way to create wealth, and an investor need not be an expert to succeed.
Investing in real estate may seem overwhelming and a bit intimidating for beginners. To get you started, here are 11 tips you must know before investing in real estate.
1. Investing in real estate is a business
Just as you would treat your company with high level of importance, such treatment should be extended to your real estate investment. Although, some entrepreneur may argue that real estate business is just an avenue for side income, it is vital we treat it as a business. Start by developing a good business plan, keep it organized with realistic goals. Investing in real estate is neither a job or a hobby, it is a business. When this business is not given the much needed attention and care as it deserves, the investor may become burned out especially beginners.
2. Check your finance
Real estate business is capital intensive. As a beginner with little or no experience, you may find it difficult to secure enough loan as you would want. Hence, before investing in real estate, it is vital to have a thorough understanding of your cash flow. This can be done by listing all your assets, including incomes and work out your expenses. Doing this will give you an idea on how much cash you have available to invest. Go to banks for loan, get to know how much you can borrow from the bank before you start hunting for properties.
3. Create a plan
Real estate investment that is not guided by a written plan can sometimes lose focus. Just as you wouldn’t take a road trip to a destination you aren’t familiar with without a map, investing in the real estate business without a plan to guide your decision is not advisable either. The plan serves as a structure for you to stay in the game, it guide the steps you must take before making any purchase in order to ensure that optimal result is obtained.
4. Set your financial goals
Any investment you make is made for a purpose. Entrepreneurs invest to secure financial freedom, to be free to do what they want, when they want it. Before you buy that first property, determine what you expect from your investments. What are you looking to achieve? What does success look like to you? What are your financial goals?
Articulate your goals and set deadline as to when you want to achieve them.
5. Spend time reading about real estate investment
To succeed you must have a little knowledge of the industry you intend to invest even when you are not the person running the business. How do you intend to acquire this knowledge? By readings newsletters and reliable information online and buying books that offer practical guides on buying, flipping, renting, and selling properties. In a situation where you don’t like reading, you should listen to audio tapes and attend seminars.
Effective study and research in real estate can only be efficient when you have a set goal so that you will not get stock in the research phase of the process.
6. Good bookkeeping
No matter how small or big you plan to invest in the real estate business, bookkeeping is very important. A business without complete and accurate records of its business transactions and other documents is on the lane to failure.
Keeping clear and accurate records will contribute to the success of your business in many ways. Some of which include:
- Provides information to enable the control of cash in the business.
- Contributes promptly to assessing the financial situation of the business at any time.
- Measure the business performance against the business projections that were originally set down in the business plan.
- Fulfill the obligations as to taxation law.
After your first purchase, meet with an accountant and a lawyer, begin plotting your bookkeeping, taxes, and legal holding status.
7. Look at plenty real estate property
Before you make any purchase, look at plenty property. Don’t just grab the first property you look at. Too many investors buy properties because they “look nice,” or the investors don’t want to put the work in to look at what’s really out there. Your purchase decision should not be based on your personal preferences. While you shouldn’t fall into the trap of analysis paralysis, make sure you are thorough in looking through properties. Give yourself a wide range of options, then narrow them down based on the criteria you have set for yourself.*
8. Watch out for growth area
There are some areas that are growth prone. Areas where there will be boom in economic activities in the future, areas that the value of property will continue to rise. Try to choose an investment property in an area where there is strong demand for rental accommodation. Some of these areas include: universities, factories, companies with high and growing number of employees, transport and many others. These are some of the areas you need to watch out for when buying a property.
9. Talk with other real estate investors
To achieve success in real estate business, you have to model your investing decisions after what other successful real estate investors in your area have done. Join a real estate club in your area. You can get access to this by searching Google for real estate clubs in your area. These clubs provide a great platform for you to network with other investors, lenders, and repair service providers. You can often pick up helpful advice about your local market from other club members. You cannot be too good to the extent of not needing help from other experienced and successful investors especially if you are a beginner. Tap into the wealth of experience of others and you will be bound for success.
10. Purchase decisions should not be emotional
Our purchase decisions should not be clouded by emotions. When house hunting it’s very easy to get caught up in emotions. While a home on a steep block may have a stunning view, it could be a nightmare to renovate due to retaining or excavation costs. Although, a particular property may look so attractive to you as a buyer, always remember that you are not going to live in the property but rather your prospective customer. Hence, your decision should not be based on your preference. Evaluate the pros and cons involved before buying.
11. Property inspection before purchase
Although some property purchases are done online, you can always improvise. You can still inspect a property through building reports, trustworthy agent, live video feeds, or pictures. Before signing a purchase contract, take the time to understand the building report to avoid expensive repairs down the track. What needs to be replaced? What will it cost you to renovate if need be?
These are some important tips you must know to get started in real estate business. Your knowledge should not be limited to the above tips, but you must understand the above to obtain optimal results from your investments.