There is nothing scarier than starting in an industry that you have no clue about, or maybe you are just new, and you haven’t learned how the game is played. Real estate is no different, and there’s no need to feel this way.
Think of it as learning a new skill that will make you a ton of money. Even the gurus you hear about were one-day newbies, and thanks to technology nowadays, it has become easier to gain knowledge in any venture you are interested in. Here are the steps you need to follow for you to understand and get some insight into real estate:
1. Do your research
Like any other industrial real estate, you have to be familiar with its terms, laws that have to be adhered to, and trends that shape the industry. Having this knowledge will be much easier to create a network with customers and other players in the field.
Learn the ins and outs of the market to have a competitive advantage and get familiar with risks that you may meet in the future. You can get this information from websites, youtube sites, books, and even programs that will teach you more about this field.
2. Network with other players
Networking is about working with people that have had some experience in the game and can give you insight into the industry. Through networking, you will be able to build a strong foundation and grow fast.
You may consider finding a mentor who will give you credible advice. This agent will help you connect with customers, an accountant who will help manage your finances, and a lawyer to help with legal matters. Through networking, you will be able to secure better opportunities giving you an upper hand and reducing the risks of making a bad deal.
3. Create a financial plan
Investing is all about creating financial goals, short or long-term. It would be best if you had a way of acquiring capital that would give you profit and probably make you a millionaire in the future.
Have a flexible budget for you and one that you know you will be able to manage if you don’t have enough capital; you might consider getting a loan or borrowing it from friends and family.
4. Find a suitable location to invest in
Where you decide to invest will affect your profitability in the future. You have to consider the population and the income of residents in the area and assess the trends in the market when making this decision.
Finding a strategic location involves looking at the prices people are willing to spend on property and considering the rates at which you will be purchasing the property. Also, you have to consult the networks you have created to properly assess the viability of the investments you decide to make.
5. Choose your niche
Real estate is vast and has various categories you can consider focusing on. There are active investments that require you to invest a lot of time and money in and are considered risky and more lucrative. On the other hand, passive investments don’t require ownership and thus require less attention and capital. Below are options for you to consider while making this decision:
- Residential Real Estate
They are considered active investments and bring a continuous flow of income over time. Under this, there are other categories like;
- Long-term rental property for a multi-family and single-family to rent and money is made through collecting rent and appreciation of the property over time
- Vocational rental property is mainly rented out to tourists during vacations and is work-intensive because they have to be maintained during the off-season.
- Flipping and micro flipping are buying a house that requires repairs, doing the repairs, and selling it to the highest bidder.
Some of the pros of residential real estate are that they are very profitable, They appreciate quickly and have tax benefits, and the cons are that they are very expensive and time-consuming.
- Commercial Real Estate
These are nonresidential investments like offices, retail stores, and hotels usually located in business places and towns. They are active investments and bring income through rent or selling them to the highest bidder.
The pros of this industry are that they bring higher returns than residential real estate, and they appreciate faster. The cons are that they are time-consuming because they require a lot of attention and have higher risks.
- Land
They buy and sell bare land with no buildings to earn a profit. They are cheaper compared to residential and commercial real estate and appreciate with time. Also, profits are made from leasing the land to farmers.
The pros of investing in bare land are that they are quite easy to acquire and do not require a lot of money to maintain. The cons are that they appreciate slowly compared to other investments and have a low tax advantage.
- Real Estate Trust Funds
These companies oversee investments in the real estate industry for their clients. It is considered a passive investment and thus requires less income to get started. They are also referred to as REITs.
The pros of REITs are they require less time and can be treated as a portfolio source of income. The cons are that they grow slowly, the owner has little control over his shares, and the government highly taxes them.
- Real estate crowdfunding
Crowdfunding is where investors band up together and buy a property to bring in the profit shared among them. It is a passive investment, and some of the pros are that it can be treated as a portfolio source of income and requires little time. The cons are that fees are charged to the investors, and a level of income is set for anyone interested in joining.
Time to act
You now have the information needed to make yourself successful, and the most important thing is acting. Many people give up even before trying, don’t be one of them. Create a suitable strategy for you, and nothing will stop you. You have to believe in yourself and trust your gut feeling, and you will succeed.