With the continuing increase of global population, the demand for shelter has also grown exponentially. Nowadays, acquiring real estate properties has not only become a trend but also a need. Hence, many investors are leaning towards starting a real estate investing business.
Unlike other investments such as bonds or stocks, the real estate investing business is very lucrative and time-consuming for the investor. It needs careful planning and patience to reduce the risk of making bad decisions that will lead to losses instead of profits. In going into the real estate investing business, the following basic steps should be kept in mind:
- Make a business plan. Like in any other business, having a business plan is essential when starting a real estate investing business. Decide on what type of investment the real estate investing business will be involved in. There are several types of real estate investments to choose from: residential, commercial, industrial or retail real estate investment among others. The decision should be tailored on one’s financial status.
- Get help from Experts. Buying real estate properties involve being subjected to government laws and property rights and liabilities. When starting the real estate investing business, it is best to consult an expert such as a real estate lawyer and/or accountant to assist in the legalities as well as the financial structure of the business. Although, this may mean that more payout is needed but it will certainly help the real estate investing business in protecting its assets.
- Do Market survey. Before purchasing a property for real estate investing business, a market survey of the property should be done. Relying simply on descriptions from advertisements or real estate brokers and agents is not a wise move. Personally checking the property and assessing its strategic value as well as its condition should be undertaken. These factors can help determine the property’s true purchasing value and its potential to make positive cash flows for the real estate investing business in the future.
- Check financial capability. Since most real estate properties come with a high price tag, not all investors have the purchasing power to pay for the full equity. Most real estate investing business use other sources to procure the means to acquire such properties. Some banks grant loans for real estate property acquisition using the said property or other properties as collateral until the debt is paid. There are also other financial sources that can be tapped into such as hard-money loans from external lenders with a much higher interest rate, private investors, or real estate investment organizations or REIT’s that has enough capital reserve to assist in the financing of the real estate investing business.
- Acquire a Management Team. When starting a business that involves large amounts of cash, it is best to seek help from experienced individuals or groups such as real estate brokers or agents to minimize the risk of negative cash flows and help get the highest profit possible in the real estate investing business.
Going into this business involves taking risks and spending much time and effort but if the real estate investing business is managed properly, it can bring huge and long-term profits.