Real Estate Investing 101 — Are you’re interested in becoming a Real Estate Investor? Many first time investors who seek to make money off of real estate make the fatal mistake of investing as an individual and not a business.
Here are a few tips that will assist you in getting your real estate venture off to a great start.
Real Estate Investing 101 – Tips on How to Get Started
As an investment opportunity, real estate investing is one of the more exciting and potentially lucrative options available. It can give you a phenomenal rate of return on investment in the quickest amount of time if done right.
We’ve all seen the TV shows on individuals who buy homes for a great bargain then fix them up and flip them for a big profit. It looks fun and exciting, but there are some things to be aware of before venturing into real estate investing. Here are some basics in getting started.
- As an investment opportunity, real estate investing is one of the more exciting and potentially lucrative options available.
- Get to know your market area first.
- One of the better ways in getting started with real estate investing is to talk with other real estate brokers or investors in your area.
The first thing to determine is whether or not you enjoy the real estate market and fixing up properties. If not, you may want to look at a different investment option. Also, if you’re having someone else manage the properties as well as fix up the homes, it’s going to eat into your profits.
Know Your Market Area
Get to know your market area first. An investment strategy that gives great results in St. Louis may not work at all in San Francisco. By getting to know the local market you’ll gain an understanding of what kinds of properties will make the most of your investment. You’ll need to know which locations are best to buy in, home size, rent, as well as other variables.
A good example is buying a home in a local housing market area that home prices are on a steady decline. It will be tough as a real estate investment to buy the home, fix it up, and try and sell it for a profit if the market isn’t there.
With that said, that same house may make for a good rental property that you could sell at a later time when the real estate market turns around.
Did You Know?
The best houses to flip are the ones that only require painting, cleaning up and new flooring.
Talk With Other Brokers or Investors
One of the better ways in getting started with real estate investing is to talk with other real estate brokers or investors in your area you’re considering investing in. It will give you a much better understanding of the local market and things that may be going on that can affect future prices.
You may find that a plant in the area is scheduled to close that will have a negative effect on prices or on the flip-side you may learn of an expansion coming up that will add 1000’s of new jobs to the area.
By understanding and learning all you can about the local market first, you can put the odds even more in your favor that you’ll be successful in real estate investing.
Real Estate Investing 101
Real Estate is a business that will not go away; there are times when the business growth slows down, as we have experienced for the last two years, yet investors know that the entrepreneurs whose structured themselves properly will survive by riding out the waves of a recession as a business entity and not an individual.
Recently, most states have enacted a law where it is against the law to have more than a few properties in your name. The solution is to invest as a corporation and not a single person.
There are many different kinds of corporations with both positive and negative consequences of having one, yet all of the risk and benefits outweigh investing as an individual. Investing as a sole proprietor or LLC, open you and your business up to be sued personally.
In other words, if things go wrong at some point in the future, not only can your company be sued, you can as well. Having your personal assets on the block to be sold because of a business mistake is no fun. Most people look at a C or S corporation and think, I don’t want to be double taxed; If you’re sure you’re going to make the money don’t worry about the taxes when it comes to your business.
Your accountant is there for you to find ways to take advantage of every write-off and credit possible for you and your business. As long as you don’t try to cut corners by getting the cheapest guy in town, your money will be well spent by getting a great attorney and accountant who knows the corporate law so that your company will be in a position to keep up with your other competitors.
Research the Area of Interest
Secondly, when going into Real Estate it is a good idea to research the area of interest you want to go into. Are you interested in commercial properties, mobile home parks, hotels, residential properties or a mixture of a few properties? Each avenue is very different when it comes to investments.
Know your business like the back of your hand; research it front and back. Know what the industry norms are and what the going rate is for real estate in each area of town you plan on investing in.
Will you be investing in your local area only or are you going to travel and invest in various areas of the country? Are you going to invest in foreclosures, tax liens, or established homes/ properties? The possibilities are endless.
Determine what you are willing to invest in by making a conservation calculation of what each option requires. Do you have electricians, plumbers, and other dedicated contractors to make improvements to a home ready to work for you at reasonable rates? If not, maybe getting into less maintained foreclosures or liens may not be a good idea at this time.
Thirdly, the best way to invest in anything is not with all of your own personal money. Finding capital can be difficult if you are unfamiliar with the business. The best way to raise capital is pitching the idea to a few of your trusted associates who have real estate experience.
Most small companies create Real Estate investment groups, where people with Real Estate experience talk to others who have similar experiences and are willing to pull their resources together to invest in properties. Developing relationships with real estate professionals in your area can be a priceless asset. They know the areas as well as anyone else and can warn you of potential hazards in homes in your area.
As a small company or individual, remember to make room on the budgeting sheet for estate taxes, and administrative fees that will come up in the future. In case of an emergency, how will you supply capital for operations costs? Having a contingency plan is necessary for any business.
Talk with your investors and/or partners about what to do for each scenario that may affect your business. It’s always a good idea to set aside funding in a small interesting bearing account that is easily accessible for those hard time that is coming.
If you’re off to a great start, a management team for your company will be required. After all, you can’t handle everything on your own. After making a few necessary upgrades to a few properties, you’ll begin to think that your time can be much more valuable by taking care of the business perspective and not replacing a sink.
Decide if you will hire a management staff full time or if you would like to hire a contract management company. Weigh the options based on what is comfortable for you. If you’re going with a contract management company, make sure your attorney look over the fine print in the contract and shop around for rates to ensure you’re getting the best available price for their services.
Many of the most well known richest people have made their money by investing in Real Estate. Sure, your not looking to be the next Donald Trump, but you would like to run a business that makes you money. Following these tips will have you on a fast path to getting started the right way in the Real Estate business.
Real Estate Investing 101: Avoiding the Risks
Everybody would be a millionaire if real estate investing were 100% risk-free. There would not be a reason not to invest in real estate. There are only those investors that are not scared about these risks and recognize how to deal with them that will be profitable in real estate investing. If you believe this is you, acquire some time to research the risks involved with investing in real estate.
Do You Know the Risks of Real Estate Investing?
- Everybody would be a millionaire if real estate investing were 100% risk free.
- There are some large risks involved in real estate investing.
- If you are prepared for risks, it will aid you in thriving in real estate investing.
Some kinds of ventures necessitate more time than others, for instance, rehab houses and distressed properties. Further kinds of ventures necessitate that you be accessible during regular business hours. You might discover that it is complicated to generate time for investing in real estate if you have a main job that requires your time. You should comprehend the time required for the diverse types of real estate investments so that you are able to arrange your agenda surrounding investing.
Financial Support Accessibility
Funding is one of the key obstacles to investing in real estate. Although you are able to invest in real estate with no money of your own, you nonetheless have to obtain money from somewhere. Investigate several tactics on utilizing other people’s money for real estate investing. There are numerous imaginative ways of obtaining the funds you require to finalize a business deal. You need to think about what you want to do.
Negative Cash Flow Possibility
Real estate has the capability to produce losses just like other investments. Anytime you depart from a deal with less money that you began with, you have generated a negative cash flow. If you have an excess of negative cash flow deals, it will leave you insolvent. It is vital that you understand how to locate superior real estate investment transactions have the ability to compromise in order to work the transactions out in your favor.
If you do not have an exit strategy, your money is unavailable, stuck in an investment property for months and at times even years, no end. If you believe it is a good idea to hang on to a property for this long, it is not something you want to do.
You must have a reasonable strategy for freeing yourself from the property before you sign on to the deal. Note the word “reasonable.” Your exit strategy needs to be rational and possible. Or else, it won’t be a good exit strategy.
There are some large risks involved in real estate investing. On the optimistic side, these risks are linked with the prospect for high profits. If you are prepared for risks, it will aid you in thriving in real estate investing.
- What is a real estate investor do? >> What is Property Investment? | Galliard Homes
- What does it mean to be a real estate investor? >> Real estate investing – Wikipedia
- How much do real estate investors make? >> How to Make One Million Dollars Investing in Rental Properties | Invest Four More
- Why is a real estate considered an investment? >> Investment Real Estate – Investopedia
- How much money do you need to invest in real estate? >> How Much Money Do You Need To Invest In Real Estate? – Investopedia
- What do you do as a real estate investor? >> Real estate entrepreneur – Wikipedia
- How much profit should you make on a rental property? >> Earning a Living With Rental Properties: Should You Be a Landlord? | Forbes