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Real Estate Trading has become one of the most popular investment methods over the last 50 years. This is a business opportunity that every investor should think about seriously to have a regular cash flow.
Read this crash course further to get all the information you need to know before trying your luck with the real estate business. Plus watch these 6 videos as long as they are available.
Different Types of Real Estate Investments
Real Estate Investment is an amalgamation of operating, investing, and financing your projects side by side to make money using a property. There are a ton of different types of real estate ventures that one might consider investing in.
Just like there are two sides to a coin, so does the real estate marketing. All the options have their own pros and cons – this is why we start this real estate crash course with the different types of real estate investments!
The knowledge of these will help you to choose the best option for yourself that will help you to reap maximum benefits out of it!
Following are the different types of ways through which you can invest in a Real Estate business:
- Rental Properties:
When it comes to a long term income, this is one of the best options for investment and probably the simplest as well. Unless your property is not occupied at the moment, this is a sure shot investment technique to earn a monthly salary. The simplest way for you to understand is by considering yourself as an individual who just bought a property. Now you will rent it further to someone else in exchange of a monthly rent. Within the rent, you will cover your mortgage rate, the taxes as well as the cost you might need for maintenance of the property. The best way to do this is by keeping the rent low that will cover your costs and a minimal profit until you complete paying your mortgage. After that, the major portion of the rent will be your profit. Moreover, during that course of time, the property would have increased its asset value leaving you with a valuable property and a steady stream of revenue.
- Vacation Rental Property:
This investment business will keep the cash flowing for a major part of the year. Another major advantage that this investment method holds is that you can always sell out the property as soon as you are done earning some revenue through it. On the other hand, you can face a disadvantage. Being an owner of the property, you will be responsible for any damages to the property even if the renter was the one who caused it. You might also have to deal with the fact that there will be some time when your property won’t be rented by anyone and thus no income from it during that time period.
- House Flipping:
You have to find an undervalued or a depressed property, renovate it and make it attractive for the customers, and sell it at your prices. This type of investment offers high profit rates if done the right way. Plus, there is so much fun to it.
However, flipping houses is almost dead – see here why.
- Real Estate Investment Trusts (REITs):
These are the companies that deal in selling, buying, managing and developing lands and properties. These trusts act as a security against the major exchanges just like stocks. They also directly invest in real estate through mortgages or properties. They specialize in offering lucrative deals when it comes to taxes on the property and are very liquid when it comes to other real estate investment types. If you are an individual, you can invest in this type of investment by purchasing shares directly through one of the open exchange markets or via an investment broker.
- Real Estate Partnership (RELP):
It can be defined as a partnership for a limited period of time for investing in a real estate. You can go ahead and get into a partnership with a property manager with a lot of experience or a real estate development firm. The latter will serve as a general partner. All you have to do is act as a financer for the real estate project to get a share of the overall ownership in this limited time partnership.
- Buying Shares/Stocks:
Just in case you are not so high on cash and you still wish to do some investment in real estate, you can go ahead and buy some shares and stocks of ongoing investment projects and thereby earn some profit through it. This is very similar to the scheme of mutual funds, just with large return rates.
- Without Own Money:
If you would like to earn money in the real estate business but without having to invest your own money, there are some very good ways for doing this. You can learn the best strategy from this free 6-part video course
How to build your Investment Team?
The one common thing among all the successful real estate investors is a carefully selected team that helps him lands the perfect deals. This means that it is essential for you build your team by choosing the right people. Many a times, investors are found cramming up tons of books just to know the all about of investing. In reality, it is nowhere near possible to know about everything so you might as well stop wasting your valuable time on this. The key to running a successful real estate business is by knowing who to ask for advices and not trying to know everything yourself. This eliminates a major reason of stress from your life and no matter what problem you come across, you can solve it from anywhere.
Each member of your team will contribute a valuable asset to your business. Hence it is important that you choose the following team members wisely-
1. Real Estate Attorney – A real estate attorney will do more than handling, closing or advising you about your daily estate transactions. They will help you to make of structure of your business and protect your assets, be it personal or public. It is always advisable to have an attorney from the very beginning to guide you throughout your business than having to hire one to defend you in a lawsuit against you. You can always go for more than one attorney.
2. Mortgage Broker – It is extremely important to have the right mortgage broker beside you that will help you in getting the right amount for your property when you put it up for sale. Not having a broker in your team may cause you many problems where more of your closings will be killed just because of delayed loan processes. Also, the right mortgage broker can help you to land great buyers and negotiate with them to quickly get a transaction.
3. Insurance Agent – Insurance Agent is that member of your team who will turn out to your most valuable asset when you need him. Through long as well as short term construction insurances and even during coverage of a liable business, your insurance agent will guide you through thick and thin.
4. Accountant – The right accountant for your team will not just help you with your taxes but also advise you in maximizing your profits by structuring your business the right way.
Some other team members you might need are-
· A Realtor
· A Contractor/handyman
· A Property manager
Now that you have a list of people to hire, you need to understand that it’s not just a position that you are offering to them. You will be making them a part of your goal.
Here is what you should think about while hiring the:
1. They deal with real estate investment- You need to hire someone who has experience in the field that you work in. Just He should know the exact tips and tricks that work in your business and will help you turn your investment into a profit. People who have experience in what you are doing will be the most appropriate people who can give you sound advice.
2. They will work towards YOUR goal –It is very essential that your team members thoroughly understand what you are trying to achieve through this business. Someone who does all the talking and has absolutely no interest in listening to you might not be the right choice for you. They should work towards succeeding in the opportunity they become a part of, rather than just working for the pay.
3. They have the required qualification – And this just not includes a college degree. You need to make sure that they have the right experience that can be beneficial for your business. They will be of no use to you if they have just started venturing into the real estate business because they might cause you more loss than any good.
Law: Real Estate Contracts
A contract is a document that is drafted between a buyer and a seller during the purchase or rental of a property. It is typically done in writing and contains all the laws that both the buyer and the seller have to abide by. It can also be called a contract for deed or land contract. A real estate contract is drafted by one of the involved parties stating the rules and is then handed over to the other party. If they agree to the terms, then both the parties go ahead and sign that legal document. If there are any counter offers to be made, they should be done before signing the contract. It is also very important to read and understand the contract thoroughly before signing the contract.
For the contract to remain effective, all the conditions stated in it should be met. It also has a date of possession mentioned in it that is usually the time when the contract becomes effective and the possession of the property is transferred to the buyer. Now depending upon the buyer’s financial condition, he might have to make some sort of down payment for the property before owning it.
Following are some essential details that are essential to be in the contract for it to be considered enforceable and legal.
1. An accurate address and full description of the property
2. Selling Price of the property
3. Payment that is agreed upon by both the involved parties
4. The specifics of a mortgage
5. Deposit Amount
6. The possession takeover date
A lawyer from both the sides of the parties can review the contract before making the parties sign it therefore making sure that no details are being missed upon.
How To Build Your Buyer List!
Having a real estate buyer list is extremely essential for gaining profits. There are a number of strategies and techniques commonly available online that are made use of to make money in real estate investing. But many of them involve putting a property up for a sale for a profit or with some sort of fee involved. If you’re into the business of house flipping, with or without renovation, your buyer could possibly be another investor. If it turns out to be an investor, you might be working upon assignments and that would include a fee on the overall deal.
Therefore, no matter what your team might suggest you to do, you absolutely need to have a list of potential buyers in place. This list can help you land a buyer within no time, and your holding costs will reduce drastically if you sell the property in a hurry.
Now you might be wondering, how to create an effective buyer’s list? This list should consist of the names of the prospective investors and the possible retail opportunities with them. The financial condition of the investors should not be a problem here as long as the options of lease purchase and creative financing are open for you to land the deals.
Recognizing the goals and requirements of other investors can help you a lot in the long run. A large portion of your clients will be buying from you for long term rental profits. Most of these investors will not prove to be as beneficial in locating deals as a few others, and there’s a high chance to bring to them homes ready to rent with a regular income.
Following are a few ways to get together a list of your prospective buyers-
1. Print Media – The classified section of your daily newspapers are included in this category. And since this method is very pocket friendly, you can make use of this method on a regular basis. It will also make sure that your future’ clients are seeing your advertisement regularly and some time or the other, the responses from them will start showing up.
You can also make use of flyers and circulate them locally with inviting captions. Now sit back and wait for them to become a part of your buyer list.
2. Signs – You might have come across some signs written in the corner of the streets or local walls. Well, those work absolutely fine as well if you are on a tight budget. Those signs will probably be visible to all the people and you never know who might turn out to be your client.
3. Craiglist- Craiglist advertisements are absolutely free of cost! And people can search for similar businesses to yours in Craigslist for phrases like “no money down home,” you can get phone calls and add people to your real estate investor buyer list just by putting up a Craigslist advertisement.
4. Join Investor’s Club – You can always locate your buyers by getting in touch with other investors who deal in the same business. Investing clubs are available in most of the areas and they are full of other real estate investors who might turn out to be good buyers for your properties. Just getting into a conversation with them might help you add some of them to your existing buyer’s list.
If put together effectively, you buyer’s list can prove to be an important asset to your business in the long run as long as you maintain it timely and use it wisely.
Risks involved in Real Estate Investments
A major portion of real estate returns are generated by the use of leverage. An investor acquires a real estate property with a percentage of equity and the remainder is financed with debt. This guarantees that the returns on equity will be high for the real estate investors but if things go upside down, it can do more harm than good. Most of the real estate investors go for a 50% debt to equity ratio to produce good returns provided the assets have been selected wisely.
Stay Motivated being a Real Estate Investor
You have finally settled on taking up real estate as your business initiative and are looking forward to it. You have also gone through various investment strategies that you can adopt including exit plans. Great!
You might be enjoying doing what you are into. But sometimes, you enter into a rut and you find it difficult to motivate yourself to come out of it. You even start questioning yourself if the decision of joining this business was even right in the first place? But the vast income streams that this business has to offer keeps luring you back into it.
You might be happy to know that you aren’t the only one facing these struggles. Every real estate investor goes through it. Following are a few tips that will keep you driven and help you reduce your potential risks. Follow them regularly starting from today itself-
1. Have your goals and objectives clearly defined. Visualize them and work towards making them a reality.
2. Prepare a list that includes all the reasons as to why’ you are doing this. This list will keep you motivated for working towards you dreams and investment goals. And every time you wander off of your track, have a look at the list again.
3. Keep yourself up to date with the latest strategies and investment techniques in the market. This will help you prevent mistakes and risks and you will be able to influence others as well.
4. Keep yourself well connected with the market. Analyze the current deals and talk about them with other brokers and investors. You should learn what you are doing.
5. Always be thankful for what you have achieved. This will keep you grounded and will give you a clear mindset as well as a better perspective.
6. Plan for long term. You will face bad times in the business but that does not mean that they will be there forever. Focus on repairing the damages done and make sure you don’t repeat those mistakes again.
7. Make a plan to deal with a lack of drive and motivation. Temporary setbacks will happen one time or the other. You should think about what others have endured in worse situations. But ultimately, they were able to achieve their goals. Knowing and learning from such people will inspire you to keep working hard towards your dreams and keep you from giving up!
8. Always stay positive and surround yourself with positive people. This energy will instantly lift your mood up and help you to be more productive. It will also help you to implement new techniques and will give you the energy to handle the pressure that comes with this business.
Some Final Thoughts
We all know that this is just the beginning, the first step that you are taking in an extremely wide business venture of real estate marketing. This business cannot be conquered overnight. It will take years of practice, devotion and experience to actually know about it and master it. For instance, many amateur investors tend to buy the properties themselves as soon as they enter the market. It is nothing but sheer foolishness. Instead, they should work on establishing a company to get hold of the property, and setting up a team that can advise you on all legal matters or any other issue that you have no idea about. You can think of setting up your own real estate company once you have achieved a net worth that is sufficient for you to cover up all your costs. Thank you so much for your time hope to work with you again.