You have finally decided to make some real estate investment for your future. Then you discover that the industry is intimidating and unpredictable. Here are four beginner tips to point you in the right direction.
Using a limited liability company or a limited partnership is better than investing with your name. Although there is paperwork involved, a competent attorney will come in handy at this stage. Save yourself future risks by starting on the right foot.
- Decide on your niche
You can get your bucks through several methods, depending on how much capital, time, and skills you possess.
- Residential real estate investments. You may buy apartments for rent to tenants for an agreed period of time. Often, the lease agreement in the United States is twelve months.
- Commercial real estate. Office buildings and skyscrapers are capital intensive but provide a steady income once you make multi-year leases.
- Industrial real estate investments. Your property may target industrial firms or customers who temporarily use the premises.
- Mixed-use investments. A sizeable amount of capital can afford you a city within a city.
- Indirect real estate investments. If you do not want to deal with the properties, you may still gain from the industry through other ways. Real estate investment trusts (REITs) allow you to buy shares and get dividends from corporations. You may also purchase land or a building and lease it back to a tenant.
- Know where your profit comes from
Real estate investment involves a lot of risks. You need to know the market well and understand when to make your profits.
- Real estate related income. Here, you make your money by buying and selling or managing a property.
- Cash flow income. You can buy a premise and rent it out to tenants who in turn pay you cash. Your clients can either be individuals or businesses.
- Real estate appreciation. Properties go up with new developments that bring scarcity around your area.
- Ancillary real estate investment income. Within a large premise, you may decide to operate your mini-business such as laundry facilities and make profits.
- Do your math
No, you do not need college skills to make calculations. However, you need to understand the costs involved such as taxes, utilities, regular maintenance, and insurance. A spreadsheet should help you make an informed decision. Ensure that bookkeeping is part of your business.
As earlier stated, the real estate business is risky but rewarding. If you start with the basics, you learn the ropes and become a guru within no time.