How to start the business of Real Estate?
Anupama Nair
www.mediaeyenews.com
What do you understand by the term ‘Real Estate’? “A real estate business is a business entity that deals with the buying, selling, management, or investment of real estate properties”. Real estate is as “the property, land, buildings, air rights above the land and underground rights below the land.” The harsh reality people face are less than five percent of people who reach the age of 65 have enough money to retire or are ‘financially secure enough’. If your goal is a stress-free retirement, it may be time to consider starting a real estate investing business to achieve your personal financial goals. Starting a real estate investment business will not be easy, but it will be well worth the work with the right preparation. There are several resources on small business systems that can make the learning process easier and more efficient.
Is the real estate industry profitable as it is thought of ? The simple answer to this question is, yes, if you handle your assets intelligently. “Entrepreneurs have the necessary experience and basic business acumen to kickstart their own real estate business, plus, they have the financial capital to invest, which is a huge advantage when stepping into the real estate business”. The most common way a real estate business can be profitable is through ‘appreciation’. What is appreciation? Appreciation here in simple terms is an increase in the value of an asset over time. The assets can be residential properties, commercial properties, and even undeveloped land. The increase can occur for a variety of reasons, such as increasing demand with a decreasing supply. Achieving profit in your real estate business comes through selling your asset after it increases in value, secondly, real estate has profits from generating income through regular payments or rent.
For residential properties, however, the biggest factor that attributes to appreciation is location. An evolving neighborhood that adds better schools, malls, playgrounds, or anything that makes the area a more desirable place to live adds value to the home. Home improvements, whether interior or exterior, can also add a significant amount of value. Commercial properties work similarly to residential properties by gaining profit through developments in location and improving the property. In terms of underdeveloped land, profits are also generated through development. As a city expands, the land outside its limits becomes more desirable to those who wish to develop it. Once a developer starts to build houses or commercial buildings, the value of the land increases even higher.
In simple terms, residential and commercial real estate produce income through rent. Tenants pay an agreed-upon amount per month which can increase through inflation and demand. After your costs are taken out, you claim the remaining portion as income. A smart move for your real estate business is to invest in a property in a desirable location, offering you the ability to secure tenants easily. Depending on your rights to the land, raw land can also generate income as companies may pay regular payments for any new structures built on the land or royalties for any discoveries made. These include but are not limited to new access roads, pipelines, cell towers, pipelines, or pump jacks. It is common for raw land to be rented for agricultural purposes, and some land may have valuable harvestable assets that can be collected periodically.
Those wondering how to start a real estate business should be cautioned that owning a real estate company is no easy feat. Just like starting a business in any other industry, entrepreneurs should log countless hours conducting research and craft a meticulous business plan before actually jumping into business. Business experts state the following tips to survive:
- Think Through Professional Goals
- Conduct In-Depth Research
- Organize Your Finances
- Craft Your Business Strategy
- Form An LLC
- Plan Your Marketing
- Build A Website
- Launch Campaigns
- Stay On Top Of Leads
- Build A Support Network
Before you begin, to start your business, take time to evaluate and prioritize your plans for the future. This means thinking through your personal, professional, and financial goals as these will influence how you start and build your real estate investing business. Start by asking yourself where you plan to be in five, ten, or fifteen years. Then, strategize more immediate steps to help you get there. The importance of the process cannot be overstated. Goals not only help investors stay focused, but they also help them take action. The most helpful is the SMART goals — specific, measurable, attainable, relevant, and time-bound. Fundamentally, it helps investors balance ambition and action steps as they plan out the future. SMART goals operate in both short-term and long-term frameworks, making them perfect for any starting point. For more information on setting SMART goals, be sure to read our guide today.
A successful business plan is always preceded by in-depth industry research, identifying a specific niche, market area, and potential competitors. There are several exit strategies your real estate business could focus on, though some are more geared towards beginners. Many first-time investors will opt for wholesaling, allowing them to learn the ropes before purchasing properties. However, depending on your goals, buy-and-hold strategies may be great options as well. Your research should then focus on what market area is best suited to your investing niche. “A good understanding of the market is important to close better deals”, is a belief people have. With proper research about the market, one can make informed decisions and close better deals.”
Look at median home values and rental prices, research neighborhood amenities, and most importantly, don’t be afraid to look outside your current location. Online research, networking events, and even getting a mentor can help during this process. Always remember, the more research you complete now, the more prepared you will be to start developing your business plan.
There are several methods to get involved in real estate with no money down, however, that doesn’t mean you should avoid taking stock of your current financial standing. The chances are, when you approach a lender, they will want information on your financial history. It is important to take a look before you are ever approached with questions. Request a copy of your credit report and review any existing accounts or investments you have.
It is not advisable to jump into the real estate investing world without first properly educating yourself. You must learn the best ways to find deals, how to market yourself, how to negotiate, and of course, how to finance deals, however, once you’ve mastered those, you’ll be on your way in maintaining a successful business. Always, start from the top and work your way down and once you’ve thoroughly analyzed each question, you’re sure to already be ahead of your competition. Starting a real estate business can be overwhelming, but by following the above steps as well as familiarizing yourself with the answers to commonly asked questions, becoming a real estate professional will be easier than you’d think. Be sure to define your goals, review your finances and prioritize networking to build your circle and watch your business grow. With the right tools, your business has the potential to help you achieve your goals and become financially free.
