7 Tips for entrepreneurs need to know before investing in real estate
The great thing about real estate is that even in a bad economy, usually will do better than stocks. The land, after all, is a finite resource. People need a place to live, work, shop and play – if real estate is really just a matter of supply and demand.
In addition, real estate will continue to appreciate despite the occasional economic crisis. In fact, it has proven to be the best way to create wealth, and an investor should not be a genius or a millionaire to succeed. Here are some tips for entrepreneurs and to launch and succeed in real estate investing:
1. Do – plan your financial goals.
Before buying the first house, or do your research first, determine what you expect from your investments. What are your financial goals? Often discuss the “time against money” concept: the more you have of one, at least need each other to achieve their financial goals. This means that you should not hesitate to take the time to understand your goals and ensure that each investment is a step towards achieving them. If you are unsure exactly how to create financial goals, meeting with a financial advisor it is a great first step.
2. No – spend a fortune on books, tapes and seminars, then just put all this information on a shelf.
It is absolutely necessary to learn some basics before embarking on the investment. So be sure to study, but do not let “the purchase and collection of” information becomes final phase. Again, with goals in mind will make the process much easier. It’s easy to get so tied under “investigation” never actually measures are taken. Instead, write specific questions you want answered or goals you want to accomplish before diving into the latest book / Seminar / etc.
3. Do – look at many properties.
Not just grab the first property you are viewing. Too many investors buy properties because they “look good” or investors do not want work to look at what is really there. Remember, you will not live there, so do not take your investment decision based on your personal preferences. While one should not fall into the trap of analysis paralysis, make sure that you are thoroughly looking through the properties. will give a wide range of options and narrow down on the basis of the criteria (goals) you have set for yourself.
4. No – back to start your investment program because it is waiting for an agreement perfect “Unicorn”.
Here is the back with number 3, of course. Many investors are beginning syndrome suffer “a-best-deal-maybe-just-around-the-corner”. This can backfire in a big way, and you could leave a great long slide just because it stands for something better. His work can feel difficult if this is your first property, but you have to realize that the “triad” rarely (if ever) exists. Better to run on an agreement that meets most of the criteria to be hoped that another may never come.
5. Do – depth financial analysis.
Be realistic. Look at the different alternatives to determine what makes the most financial sense. And never buy a property at a higher or more terms less attractive price analysis said it was logical. Beware of vendors trying to exaggerate the value of the property through a pro (estimated) forma basis. While you can use a pro forma basis to start the conversation, make sure you know the actual figures before closing. Look at the tax returns of previous years, property taxes, maintenance records, etc., to have a good idea of ??the actual income and expenses.
The most important numbers to know are:
Net revenue (revenue / expenditure)
Cash flow (net income / payments of debt financing)
The return on investment (cash flow / investments)
maximum rate (net income / property prices)
Cash-on-cash return (cash flow / investments)
Total investment return (total return / investment)
In each case, the “investment” refers to how it is invested in the property. “The debt financing” means the loans that may have to take to buy the property. And “total return” refers to cash flow, the exercise of participation (ie, equity purchased by its tenants to pay rent), appreciation and taxes.
Once you understand these numbers, you should have enough information to determine whether or not the acquisition of property to fit their financial goals.
6. Do not – Try to buy goods that the seller is not motivated to sell.
If the seller is motivated to sell, it is not likely to get the best price aligned with your financial goals. So how can you tell if you are motivated seller? Look at the requested price. For example, if the property was on the market for a year for, say, $ 200,000, with little or no reduction in price, the seller is not clearly highly motivated to move the property. However, if this same property was on the market for a year and had its price dropped significantly, the seller is very likely that whatever it takes to get the property of their hands. Of course, this raises the question of how to find motivated sellers. There are many approaches, not all of them will work for you, depending on what property you want. However, some reliable methods include:
Attend open days
Looking vacancies / unsightly properties that are for sale
Spreading the word about you and what properties you are looking for – actually
The oldest form and looking in the classified section of your local newspaper
These are just a few ways to find sellers, but there are potentially dozens of other methods, depending on what type of property you are looking for.
7. Do – recognize the difference between real estate investment and real estate.
As an entrepreneur, you have a business and real estate investment is the best choice to support the business, not replace it – unless your intention. In other words, do not get so caught up in the execution of transactions your heart hesitates office. If this happens, you will face a bumpy road back to stability. Unless your company is itself the real estate, or looking to enter the business full time, always remember that the search for these offers is a means to an end, not an end in itself.