Investing In Real Estate: Tips For A Profitable Real Estate Business

08/11/2018

Aspiring real estate investors know full well that there is an excellent potential for financial freedom by running a successful real estate business. Real estate is one of the most stable and in demand assets investors have and want in their portfolio.

People will always need a place to live and real estate investors that own rental properties can help provide that. Before investing in real estate, you must first set your financial objectives. The whole point of investing in real estate is to make money work for you.

Each investment property will need to have a decent return and eventually pay for itself. That means the income generated from the rental of that specific property should cover any costs of owning it. This includes the payments being made on the property, taxes, insurance, regular maintenance.

There are several things to keep in mind to ensure that all real estate ventures will be profitable.

Use Logic Not Emotion

Some investors make the mistake of allowing their feelings to influence their business decisions. Thorough research is critical when looking for an investment property.

The results of that research would then need careful deliberation. Buying real estate just because it stirs up some emotion could be a recipe for disaster. Think things through when selecting a property to invest in.

Create an LLC or Limited Partnership

Buying real estate under a Limited liability company will shield business owners from any lawsuits. People are quick to sue property owners for the most ridiculous reasons and protecting personal assets with an LLC just makes sense.

Register your real estate business as an LLC or limited partnership to prevent anyone from coming after your personal assets. The worse case scenario with an LLC to protect the company is to lose the money invested in that property.

Property Appreciation

Buying real property that greatly appreciates in value is the most ideal type of real estate investment. Selecting properties located in areas that have or will have high demand is one of the significant factors for a piece of real estate to increase in value.

Choose real estate that is in an area that is being developed or about to undergo major development. Buying land while it is still undeveloped will be a significant investment since it will have the highest return.

Buying property in a neighbourhood that's about to be developed or purchasing condominium units at its pre selling price is a perfect example of buying real estate before it gets expensive. Investors will be able to sell these properties at a substantial profit effortlessly.

People will always want to buy property in a well-developed neighbourhood. Another good example of buying and selling real estate when it appreciates is house flipping. Investors look for properties that can be purchased for less than the market value of similar homes in the area and invest even more in it.

Investors will buy the house and renovate it to make it look like new. The increase in value by installing new flooring, renovating the kitchen or bath will drastically increase its market value. If done right, house flipping can be a very lucrative business.

Real estate investors also look for properties with homeowners about to default on their mortgage and offer to buy their homes at a discount. Homeowners are likely to accept a small offer rather than having the bank repossess the property.

Positive Cash Flow

Investing in real estate that will be used as rental properties is one of the most profitable investments one can make. Investors often use debt to purchase properties to generate rental income.

As long as the rental can cover all the costs of owning it, then that property can become a good investment. The renters would be paying the investor or owner that is technically paying the bank that it is mortgaged with.

This cycle can continue until the property is paid off and during that time the rental property will earn equity. Follow the 1% rule when buying real estate for rentals.

As long as the monthly revenue of a rental property is at least 1% of its purchase price it can be considered as a good investment. Let's say a property costs 300k to purchase, the property should at least generate 3k per month to be deemed as positive cash flow.

The 1% rule is there to safeguard investors from paying for any repairs or vacancies. It is still manageable to rent a property for less than 1% of its purchase price if the area has a low vacancy rate.

Build a Network

Real estate is a business of dealing with people. Meeting clients, realtors, lenders and other investors will be part of a daily routine. Building a dependable network of real estate professionals will make buying and selling property more manageable.

Having to deal with entirely new people for every real estate deal can become a pain. Look for the best representative of each aspect in the real estate process and build lasting relationships with them.

Establishing a capable network of real estate professionals will help streamline each real estate deal and boost productivity.

Ancillary Real Estate Investing

Owning apartments or condos is one thing and will already generate substantial monthly revenue. Ancillary real estate investments are vending machines or laundry facilities which can add even more to the monthly income of real property investments.

Tenants and consumers alike love the convenience of vending machines. Adding these money making machines in investment properties is a fantastic idea to capitalise on an already lucrative investment.

Conclusion

Starting a real estate business can indeed grant financial stability to brave entrepreneurs. Create a company using an LLC to protect your assets. Build a network to make each real estate transaction easy.

Carefully select investment properties that are positioned to provide the most return for your investment. When choosing rental properties, follow the 1% rule unless it is safe to rent it out for less. Capitalise on rentals by adding vending machines or laundry equipment when applicable.

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