Before you head out to invest in real estate, there are a number of things you need to think about. Investing in real estate is not just going out, buying a property and then figuring out what to do with it.
If you take some time and think about the following things, you will have better chances of success. The success of real estate investments lies in making a profit. Profits can be obtained from a monthly cash flow or from the sale of the property at a higher price.
There are six things to think about before investing in real estate:
Exactly why do you want to invest in real estate? Some people are looking to generate a steady stream of income while others are only looking to make a quick profit in each business.
Some people are looking for a retirement strategy. By investing in income generating properties, a retirement portfolio could be made by diversifying stocks or mutual funds.
Many people just want to get rich. Sure, they have seen those commercials “get rich quick”, so they think they can make a lot of money really fast. In most cases, it does not work that way.
How much time do you have? Do you have another job? Has family? This will help you decide what type of real estate investment strategy you want to undertake.
“Buy, lease and wait”, usually investing does not take much time and you can always hire a property manager to do most of the work.
If you are a busy person, you may want to undertake jointly with another person. You provide the funds and the other person finds the property and cares about the marketing, sale, administration, etc.
There are many experienced investors who are looking for other people’s money to invest. These investors want to use the money of others to increase their finances. This allows them to do more business and get a better return on their investments while at the same time providing other people with a better return.
Be sure to partner with a reputable person. You should ask for references and ask about the businesses they have done, if you have any questions, do not be afraid to ask questions.
What is good? What do you enjoy the most? Are you skilled with your hands or good with spreadsheets? Do you like to evaluate business or balance the hammer?
Your skills will play an important role in deciding what kind of real estate investment to get involved with. For example, if you are skillful with your hands, perhaps the arrangements and changes are good for you when buying a property that needs some type of repair. Could be cosmetic arrangements or a major renovation. He then repairs the property and then sells it when the fixes are ready.
If you are not good with numbers, you could partner with someone who made all the quotes and costs, or you could also hire someone.
Capital / Career
How much capital do you want to start investing? Or are you thinking of turning investment into real estate into your full-time job?
Obviously your options will be limited if you do not have the capital to invest, but there are ways to make money on real estate without having your own.
For example, you can find someone to join.
Or you could opt for “sandwich lease”, this is when leasing the property of an owner and then sub-leasing someone else with the option to buy. In reality it is the “lease with purchase commitment” strategy.
You could even be an intermediary finding business for others and getting a salary that way.
Regardless of the answers to the above questions, you should take some time to educate yourself. You need to know a little about each thing so that you can handle the people and the process of investing in real estate.
Start by reading a couple of good books or go to real estate investment club meetings. There are some good blogs that cover many topics in real estate investment.
But be careful as there are many people giving bad advice. Find out if others recommend you to follow.
As I mentioned above, how much you train depends on how much time you have. You might just want to have another investor invest your money and be a “silent partner.” There are many ways to do that too, but it is important that you be empowered to understand your options.
After you have analyzed your situation and determined what types of real estate investments you want to get involved in, then you should develop a business plan.
I’m not talking about a 30 page plan. A plan of 1 or 2 pages will suffice. Your plan needs to identify what type of real estate investment strategy you are looking for, as well as your marketing and finance strategies.