Grow Real Estate Business
The real estate sector has long been the primary driver behind many people’s wealth. With real estate, you can buy or secure title to land, leverage the agricultural potential of that land, build rental homes, or put up some attractive investments which can generate rental incomes.
On the whole, the field of real estate is constantly evolving and appreciating over time. It is a well-known fact that real estate brings in better returns than the stock market owing to limited volatility. In this field, the potential losses are greatly minimized by the total duration of time you get to hold onto your piece of property. With the improvements of market conditions comes the improvements in the value of the property concerned.
Listed and discussed below are some 10 tips to improve your real estate business.
1: Leverage the Hidden Market Potential
Perhaps the best way to do this is to purchase a piece of property from a distressed seller. Shun the auction deals. Instead, focus on those pieces of property which are dilapidated and in need of complete overhaul. Also, look out for those homes belonging to the distressed sellers but which are yet to be listed for sale.
Examples of these are the homes of couples who are going through a divorce or a family that intends to dispose of their parent’s homes after their passing. These persons simply want to recoup their money and these homes may, after all, be in the best conditions at the time of sale.
2: Do not speculate
Most first-time real estate investors watch shows like what is on HGTV, who get the false illusion that making it in real estate is like injecting tens of thousands of dollars in a property and reselling for hundreds of thousands of dollars.
This is far from the truth. The harsh reality is that you will have to set a reasonable expectation from the word go. For this to happen, you will have to find out how much the pieces of real estate which lie within a radius of 0.5 to 1 miles of your targeted locale are going for.
These pieces of property are called COMPS. On the same note, you have to ascertain how much the pieces of property with the same number of bedrooms or bathroom in the target area rent for in case you intend to lease yours.
You should invest on the basis of real numbers which are clearly visible rather how much you anticipate them to be. When it comes to the renovation of the homes also, be quite conservative with the repair estimates you make. You may wish to obtain bids from a couple of licensed contractors. Add a further 10-20% contingency for those expenses which are largely unexpected.
3: Maintain a High Level of Honesty
In most instances, real estate investors are often exempt from any specific degree of ethics. Even though this situation is somewhat advantageous, most shrewd real estate investors deliberate choose to uphold a high degree of ethical standards. This stems from the fact that the field of real estate entails interacting with people. As such, the reputation of investors is a strong consideration. Effective real estate investors understand that it is better to act fairly instead of seeing how far they can probably get away with mistakes.
4: Not every agent understands investors
Real estate agents are great resources in any real estate venture is certainly not in doubt. However, most of them do not comprehend the great financials which actually transpire behind the real estate investments business. Most of them emerge from traditional retail sectors and have no real investments in real estate on their own.
It is therefore imperative to work only with those real estate professionals who may possibly educate you on the market fundamentals and those professionals who can comprehend key metrics like cap rates, return on investments, vacancy rates, cash on cash returns, holding costs, cash flow and a host of other financial metrics which the typical investor ideally ought to know.
Inquire from the agent and professional the kinds of returns they have succeeded in bringing in to their past investors. Do they possess any prior experience working with real estate investors? What kinds of investors have they worked with in the past? By asking these three simple questions, it is possible to qualify your agents before determining whether or not to transact any business with them.
5: Encircle yourself with like-minded real estate investors
This one is by far very important. What kind of a person would you wish to be? The answer is a successful real estate investor and entrepreneur. For this reason, you have to choose your circle of friends to only include those people who have the same ideals and goals.
I vouch that there are people of your caliber who are equally desirous of the same goals, ideals, and aspirations as you. You may find these people on Meetups and Craigslist. Alternatively, you might find them in your church or by inviting strangers to play the Cash flow 101 in public places like the Starbucks.
While at it, eliminate all negative people in your life. In case you confide to anyone about your intentions and receive a negative response, you should avoid that person like the plague. It may be tricky if the said person is a member of your family, but you have to know otherwise.
Also, make deliberate measures to surround yourself with only positive people who are equally enthusiastic of your desire to change for the better. Some decisions may be challenging though. For instance, as you advance you might find some of your present colleagues redundant or irrelevant. You will thus have to decide to shed them off.
6: Understand your Costs in Advance
If you have never attempted real estate before, it is important to understand the cost implications upfront. This should extend beyond the realtor commissions and repair costs. It must also factor holding costs such as electric bills, monthly lender costs, water bills, landscaping, and more. Many a newcomer in the field of real estate lack the skills to accurately estimate the repair costs for cracked foundations, fixing of electrical issues and tackling pest infestations, among others.
Most of these problems are unsolvable on a typical weekend. As a matter of fact, most do-it-yourself tasks reduce the real value of homes while attempting to rectify a person’s plumbing and electrical issues on your own may render it unsaleable not unless you already have the ability to perform it optimally. Yet many others fail to factor the closing cost budgets, utility, or insurance and end up losing all the money in the deals.
7: Understand the Market
One of the most effective means of mitigating losses in real estate is to understand the market well. You should know how much a typical house in the community you are interested in investing in goes for as this shall determine your rental costs.
On the same breath, you also renovate the properties in such a way as to make them more appealing to the would-be buyer. For instance, never scale down the bedroom counts in a community that is supposedly family-friendly. You also, on the same note, never shrink the size of the closet or the master bath for the sake of installing a hot tub which only a few might possibly appreciate.
Do not rip a good yard out to install a pool in case the demand is too little for the same. Select the best real estate markets such as the west and east coast of Florida which has witnessed steady growth over the years. This surge in the demand for homes has seen many home values to skyrocket to around 10% a year for the last couple of years. These prices took a nosedive in 2008, a fact that enabled them to adjust. The average prices of homes this day have stabilized to the levels last seen in 2006 when they were at their peaks. They are nonetheless more affordable when adjusted for inflation.
8: Learn to converse to property sellers, buyers, and investors well
Everything you do boils down to excellent communication skills. I have never always possessed them though. This is mainly because I am a natural introvert. With regards to this, I have always been intimidated by the mere thought of talking to other people as regards what I do and my overall goals. I, however, do converse with them anyway.
To be a successful communicator, learn to ask only those questions that are relevant. How do you determine the relevance of a question? Refer to the previous four bullet points! It takes a journey to attain. Take some training from a competent real estate investor. A rule of thumb to live by as an investor is brand yourself as what you are. Make sure every person you come in contact with knows that “We Buy Houses in X location.” Depending upon where you reside and do business in.
9: Teamwork brings out the Dream-work
Do not attempt to do it all on your own. The world’s most successful investors usually employ a team around them that works hand-in-hand to aid them in accomplishing their real estate goals. Who is your preferred real estate lawyer? What about your licensed real estate agent? Your contractor of choice? Insurance agent? Lastly, who do you prefer to be your asset manager?
The key to emerging as a successful real estate investor is to pay more attention to your personal strengths while giving those around you the same leeway. You can only be sure to accomplish your real estate goals prudently and efficiently if you have a great team working with you.
10: Develop a specific Niche
It is necessary for investors to stay focused for the sake of gaining the depth of knowledge which is essential to succeed. Investing some time to build this level of understanding is absolutely crucial towards long-term success. After the mastering of a particular market, the investor can then move on to other areas by employing the same in-depth approach.
Is real estate really a good investment?
Generally speaking, real estate is a good option for those who intent on achieving financial success. There are a number of benefits of purchasing investment properties over and above starting your own business.
For one, investing in real estate provides a more predictable cash flow when compared to the stock market. Moreover, it is also safer than investing in the stock market or other smaller businesses given the fact that the underlying property retains its original value.
These notwithstanding, you have to be sure to prevent any mistakes which may lead to the shattering of many dreams of becoming rich in investing in property and possible bankruptcies.