Real estate accounts for more than half of the world’s valuable mainstream assets. It also forms part of most personal, corporate, and national wealth. It’s prudent to consider real estate investing when looking for asset classes for your capital.
When done right, you’ll have an additional income stream and diversify your investment portfolio. Most new investors get stuck trying to turn their money into profit in real estate. Here are seven key points to consider for high returns:
1. Type of Real Estate Investment
As a new investor, you can venture into real estate crowdfunding that lets you invest in commercial and residential properties. This form of investment requires a relatively small capital to start.
Alternatively, you may turn to real estate investment trusts (REITs) since they offer more liquidity. REITs raise funds by issuing bonds and selling stock shares to potential investors. They use the earnings to lease out and purchase real estate assets and pay investors a certain percentage of the profits.
2. Cost of Investment
Figure out the total capital you’ll need to make an initial investment. You should also consider the source of your capital or personal loan if you don’t have disposable income.
If you are considering rental properties, figure out how much you will charge as rent.
For a complete guide to purchasing your first rental property, read more here.
3. Real Estate License for New Investors
As a licensed real estate agent, you get unlimited access to properties on reliable listings. You also amass huge profits since you won’t have to work with an agent.
On the other hand, you get to work with different agents in different niches if you don’t have a license.
The decision to get a license or avoid it entirely lies in your goal of investing in real estate.
4. Company Structure
You can structure your real estate business as a Sole Proprietorship or LLC (limited liability company). With an LLC, your company will run as a distinct and separate entity with a bank account and tax pin. Sole proprietorship, on the other hand, allows real estate investors to enjoy total control of the company.
5. Marketing Campaigns
Use direct mail campaigns since they allow you to choose your target audience, campaign scale, and message. They also give prospective clients a chance to connect with your business.
Your marketing campaign can also use blogs, websites, paid and unpaid social media ads, and email marketing.
Figure out whether you will hire a landlord or property manager once you invest in rental properties. You should also consider managing tenants and the amount of money to charge them as a security deposit.
Find all proper legal forms (notice to quit, rental application, and lease) before launching your business.
7. Risk Tolerance
The common types of risks associated with real estate include problem tenants, high vacancies, negative cash flow, and bad locations. Learn more about the degree of risk involved in your specific real estate investment before taking on the new venture.
Your risk tolerance strategy should allow you to recoup initial investments and avoid making losses in volatile situations.
Take Your Real Estate Investment to a New Horizon
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