Investing is the first step in setting up a real estate business; however, it is very risky too. It involves the ownership, buying/selling, rental, and management of properties for profit. Therefore, an entrepreneur must take into account all the possible ways to invest safely in real estate. The major challenge is to seek good opportunities as there is a lot of competition among investors to purchase properties, hence, one should be aware of the price variations in different places.
The major drawback of investing in real estate is that the business can go into negative cash flow because of investing in the wrong property, resulting in sale of properties accompanied with huge losses and investment failures. Hence, the nature, type and location of the property to be invested in is very important to take into consideration in real estate business.
Once the risky decision making of where to invest is resolved, the entrepreneur has to find ways to make the investment. Huge cash flow is obligatory for the investor to start a business. However, that should not be a big source of concern because capital can be gained through mortgages, and other long-term loans; investors can also form a partnership to generate more capital. To invest safely, earn long-term profits, and survive among competitors, investor hires agents to assist them with the price variations, and worthy investment opportunities.
A study found out that 96 percent of people who invested in real estate gained some sort of financial success. Likewise, a further 94 percent of people were satisfied with their investments and intended to make additional investments of this sort in the future.
Mentioned ahead are five ways to give you a head start in investing in real estate:
- Invest in rental properties
An investor can buy and rent out the whole property to earn a monthly income. The amount of expenses including taxes and insurance, however, should be less than the amount of rent you get; the investor has to evaluate the prices before buying the property. Considering they have just begun, they will need to keep a low investment to start out. One needs to make sure that the place is within their range. Also, type of location, whether commercial, residential, industrial, or simply vacant land, matters too in case the investor wants to build dairy and poultry farms on it in the future.
Rent generates steady income and most businessmen are content with that kind of stability. Not to mention, rental commercial shops and apartments generate more profit than the industrial areas.
- Fix up and resell properties
Firstly, an investor could purchase properties when their market value goes down. There are certain situations in which this is applicable such as changes in policies or a country’s political situation could affect the prices. If an investor buys at the time when the property price crashes, he could gain a massive profit once the property’s market value rises.
Second option could be to buy underpriced houses in demolished conditions and invest in their renovation, which will allow the investor to earn a considerable profit by selling the properties at higher prices later.
Thirdly, properties that are under construction are generally sold for lower prices coupled with instalments so they are generally easier to invest in. However, once the property is ready, it is sold for much greater values as its market demand and price both increase.
Fourth option could be to make a purchase in the outskirts of the city as these properties are generally of lower prices, but their value is expected to rise significantly once urbanization increases. However, this option is not that popular if you are looking to earn back soon.
- Use a crowdfunding service
This is another popular option for investors who do not have sufficient capital to begin with. Companies connect with the real estate developers to invest and they lend money as debt or equity for the company’s personal expenses. Investors receive monthly payments, which then
has to be returned despite whatever their profit or loss might be. This can be tricky if your
property goes into loss, and you have to pay back more than what you were able to earn. For e.g. if you were given 500$ to begin with, and you sold your property for 300$, you will have to pay back the 500$ despite the 200$ loss. Nevertheless, if you have undertaken your decision of buying a property smartly then this is a good option for you.
Real estate crowdfunding is only open to the companies that possess official credentials.
Real estate investment trusts (REITs) are the type of investments that allow an investor to invest in real estate, which is not a physical property. These are open-end investment companies, which issue shares and earn high dividends. They are commercial buildings such as office buildings and hotels.
It is a good investment for those who do not want to earn their dividends right away and automatically reinvest their dividends to grow their investment further. Some REITs can be traded at a stock exchange and some are not publicly traded so it gets very risky. If they are not publicly traded it gets difficult to trade, therefore investors should trade REITs publicly as it is easy to purchase them from a broker.
- Rent out a room
If the investor is not willing to make a heavy investment and is not able to generate enough capital, he can rent out a portion of his house or office property and earn a monthly income through it. People generally living alone find this very easy and it’s very common for newly emergent businessmen to share their apartments with roommates or give a section of their house for rent. This helps them earn without making any prior instalment, and this thought to be feasible as well.
To sum up, investing in a real estate business and setting it up comes its fair share of challenges and risks involved; but once you have taken all the right steps and start with a safe investment, the results will be fruitful. Next step should be real estate management; management is highly necessary and needs to be taken seriously. Your hard-work depends on how you choose to take it from there onwards. This not only promises expansion of your business but also makes sure that your income is steady. There is a lot that can be said about the way you decide to manage your business however, all of that is secondary compared to the ways you decide to begin.