call Dwan at 303-870-8851 right now!
call Dwan at 303-870-8851 right now!
When it comes to the world of entrepreneurship, there’s very few consistent and reliable opportunities that are quite like becoming a real estate investor. Whether you become a residential or a commercial real estate investor, there’s always going to be a need for physical property. But, unlike other industries such as tech or finance, which might rely on both innovation and market changes for optimal returns, real estate depends on one sole factor: personal need.
Similarly to any other investment, there are factors that you must consider before investing in real estate. And, it’s not limited to location or the volatility of the market.
Real estate sales in the U.S. were expected to top $165 billion by the end of 2019, representing an annual growth of 4.8%. A recent survey from CBRE listed Denver as one of the top 5 markets for commercial real estate investments, reaching $12.5 billion in 2018 alone. And, with the average salary for real estate investors being just shy of $124,000, you may be tempted to jump right into the opportunity without weighing both the pros and cons. Before you do, here’s a few things to consider.
Far too often, we hear from would-be real estate investors who saw a home-flipping show on TV and assumed that it really was that easy. It isn’t. It takes time, experience, and a lot of foresight in order to build both your knowledge base as well as your profit line. This doesn’t necessarily mean an advanced degree in real estate development. There’s actually thousands of successful real estate investors who haven’t even finished college. But, doing your homework and familiarizing yourself with both the basics of the real estate market and available resources will definitely help you as an investor.
First time real estate investors who have done their homework often consider strategizing to be the most fundamental component of operating a successful business—and they’re right. Strategy is critical to any entrepreneurial venture. The problem is that over-strategization rarely leads to actionable results. Investing is always going to be a risky gamble no matter what venture you’re considering. But, if you want your investments to pay off, you need to focus on action just as much as analysis. Develop actionable goals including hard timelines, optimal ROIs, and the necessary capital to achieve these goals. You may not see immediate results or even an ideal one. But, this plan will provide you with a yardstick in which you can measure both your success and your shortcomings.
The notion of purchasing a property with a minimal down payment can be a tempting one. And if strategized correctly, it can certainly increase your profits. The problem is that leveraging multiple properties by taking out a second loan can be just as risky as investing in real estate without proper knowledge. You simply don’t know if you’re going to see a return which can justify the second loan, leaving you with potential mortgage debt. And, if you’re using non-bank affiliated financing options to purchase property, that debt is going to be even riskier; sometimes at triple the interest rate that you’d find with traditional lenders.
As a first time real estate investor, leads simply aren’t going to come to you without effort. While it may seem like marketing can be a time consuming and expensive strategy, you’ll find that you can conduct much of it in your spare time. Whether it’s actively networking with other real estate investors, keeping a social media profile, maintaining a website, or simply reaching out to potential sellers and buyers yourself, you need to sell yourself as much as any other business does—and given the competitiveness of real estate investing, maybe even more.
Just like any other market, the real estate market has its ups and downs. And, while you can generally expect some degree of return on both your time and your investment, you may find that returns won’t always meet your expectations. If you’re finding that a strategy which worked for you last year simply isn’t working for you now, then you need to adapt to these changes. One of the chief causes of failure in real estate investing is rigidity. Allow your business model to be agile enough to assimilate to the most turbulent changes in real estate. Your success may depend on it.
It’s certainly more cost effective to manage your own business. But, how much do you truly know about the ins and outs of your business model? More importantly, do you have the time, patience, and energy to handle the minutiae of your business—including scheduling, client outreach, marketing, and expense tracking? As a real estate investor, you’re going to need to wear a lot of hats, and not everyone will fit you. Figure out what your own personal strengths and passions are (finding a mentor can be incredibly helpful with this process) and consider delegating the rest to an assistant or a business manager. It can be the difference between expanding your business and burnout.
Real estate investors must utilize proven strategies if they hope to survive in a competitive market. If you’re in Colorado, we can help. Find out more at Colorado REIA.
As the old saying goes, “If a job’s worth doing it’s worth doing well.” In real estate, we have a different saying: “If a property’s worth your time, it’s worth your investment”.
Yes, investing in real estate can be profitable. And yes, it can guarantee you a steady future income stream that can sometimes triple your ROI. If it didn’t, you probably wouldn’t be reading these words right now. But there’s one motivation that virtually no property investment gurus talk about:
Just like you, there are thousands of other Colorado investors who have decided to try their hand in the game of real estate investing. Some have been quite successful while some fold right before hitting their big win. What they fail to realize is that it’s not a game. It requires finesse. It requires foresight. And it requires getting your hands dirty. That’s what makes it so rewarding.
But aside from the challenge, there’s are also some substantial investment advantages in real estate. If you’re still debating why you should join the fray and start investing in real estate, here are some reasons you may not have considered before.
Real estate is, quite literally, a brick and mortar affair. Unlike other investments, the demand for physical property is a basic human need. Stocks can fluctuate. Futures are never written in stone. Regardless of the volatility of any market, the need for shelter (be it commercial or residential) is a constant. Real estate has physical value, one which doesn’t just diversify your investment portfolio, but also gives it a definitive shape that can weather any economic uncertainty.
There’s a direct correlation between GDP growth and real estate demand. While there are thousands of factors that contribute to national GDP growth, real estate doesn’t only remain a consistent player, but rather it frequently exceeds expectations by almost three percent in the second quarter of 2019.
Both supply and demand are critical factors in both personal investments and collective GDP growth. The increased demand for real estate means increased rents, and subsequently, increased capital values. By incorporating this increase in capital appreciation, real estate serves as a definitive backbone to any national and state economy, which is one of the reasons why there’s a greater tax advantage in real estate than in almost any other industry.
No one likes the idea of having to pay taxes on an investment, and you’ve likely heard horror stories about property taxes. The fact is you can use your investment in real estate to qualify not only for personal deductions (including property maintenance and mortgage interest), but also by claiming depreciation, which is a particular tax code incentive property owners can utilize, even when their property actually appreciates in value. By claiming like-kind properties under a 1031 tax exchange, you can defer the gain from the sale of any property to a similar property being purchased for your own personal investment to optimize an even greater tax advantage.
As mentioned earlier, the need for real estate will always remain consistent. What isn’t consistent, however, are mortgage rates. While you may need to shop around in order to find the best rate, real estate investors typically have an advantage when it comes to mortgages – sometimes, in excess of well over 25 percent.
By leveraging a mortgage in lieu of your initial capital, the percentage of net cash flow gained by renting property to tenants can be placed towards other residential purchases, ensuring not just a consistent income stream, but an investment which can maximize your return. Once you’ve established sufficient equity in one property, it can either be secured by a second loan or refinanced for the original mortgage loan amount plus the actual value of the equity itself. It’s a process that can be repeated across multiple properties. In both instances, you’ve established a robust cash flow that doesn’t just optimize your investment. It transforms it.
If you’re still considering whether or not you should invest in real estate, It’s not a question of whether there are advantages. Rather, it’s a question of how you can maximize them.
Investment strategies may come and go, but the demand for real estate only increases. Find out the leading tips from professionals with almost 75 years of combined experience. Visit Colorado REIA today.
We all hear that “there’s never been a better time to join the real estate market.” And personally, I agree. But, there is one problem with succeeding in real estate.
Overcrowding. And not just of homes, but of both realtors and investors as well.
If you’re going to stand out in the real estate market, you need to position yourself as a local authority. This isn’t always easy—especially in a state like Colorado, which has an estimated 35,000 practicing real estate agents. Denver alone has been known to have more active realtors than there are real estate listings.
So, how do you succeed in the local real estate market?
Consistency. Constancy. Content.
If you’re not in the habit of consistently marketing yourself (and improving your skills in the process), then you’re never going to connect with as many buyers as you should. If your efforts are inconsistent, then you aren’t in the position to place yourself in any role of authority in the real estate market. And, if you’re not constantly generating new content, you’re simply going to lag behind your competitors.
Effective marketing isn’t a mysterious process. A website, business cards, and a social media presence is all that you need to get started. But, you also need to be proactive about your efforts. Review the content of your competitors. Are they constantly generating new and informative LinkedIn posts? What do their sales look like? Is their message coherent? Honest? See what works for your competitors. And do it better.
One of the biggest mistakes that many real estate newcomers make is to attempt covering an entire city. While this might seem desirable,it’s simply not sensible. You’re going to spread yourself thin. And, you won’t be able to achieve the in-depth expertise that today’s homeowners demand.
Positioning yourself as a local authority means selecting only a few choice neighborhoods. You might even specialize in smaller, inexpensive properties that few agents would even consider touching. Authority is developed when you familiarize yourself with a specific niche. And, it only comes through time and experience. Set realistic goals each week and strive to exceed them. This builds confidence. No prospect wants an agent who is insecure about their place in the real estate market.
One of the chief reasons why many realtors rarely last more than a few years in the market is burn out. They tend to be so concerned with establishing their name and their book of business that they don’t allot personal time for themselves.
You can avoid this by developing a routine schedule that optimizes leisure time as much as it does your professional life. Devote a few hours a week to researching trends in the real estate market in addition to marketing efforts, but don’t forget to allow yourself to have time for your own personal interests and hobbies. Don’t tax yourself by overworking, but develop at your own pace. An overstressed realtor is a recipe for disaster and both your prospects and your competitors can pick up on this.
The process of acclimating to a new and highly competitive business segment becomes much more seamless when you can find a professional voice to teach you tips to watch out for based on their own personal experience. But, finding the right mentor (especially in the real estate market) may take some time. Here are some qualities that you might want to look for when selecting a real estate mentor:
It’s natural to think of competition in the real estate market as being cutthroat. This is true in just about any professional venture. But, the real estate market is slightly different.
For one, it’s a tightly knit community of peers who often remember their own uncertainty and difficulty when first learning the tricks of the trade. This means that other realtors are likely to help you by generating business referrals from vendors, appraisers, sellers, and mortgage lenders and by offering guidance and advice. Not every agent will be so approachable, but you’ll find that by asking the right people the right questions that you’ll gain a much deeper level of insight and fresh, new perspectives that can challenge and inspire you.
It’s easy to see that your purpose as a realtor is to provide a great deal on a home and as seamless a transition as possible. But, your prospects are just as interested in offers that are unique, personal, and so valuable that they simply can’t get it anywhere else.
The real estate market has changed in the past 15 years. It’s no longer considered adequate to provide your clients with just a smooth transaction. You have to be a personality. You have to offer expert advice. And,you have to provide prospects with an experience. Don’t think of your career as merely generating sales. Think of your career as developing a brand so clearly that it’s recognized by name alone. You may just be starting your career now, but think about long term goals. Reputation. Authority. And ultimately, value—the bottom line of your business and the key to your success.
Need more great tips on how to succeed in today’s real estate market? Visit our website at Colorado REIA.
There’s never a bad time to market yourself as a realtor. However, there are some times that present greater opportunities than others. There are currently close to 1.4 million active members of the National Association of REALTORS®, with some 26,701 members being in the state of Colorado alone. And, those numbers are only expected to increase. The median price for a single family home in Denver was estimated to be $510,000 in July. This estimate doesn’t take into account Aurora, Boulder, or Commerce City.
You may have already mastered your prospecting strategy. You may have even decided to cover niche neighborhoods and segments that no one else would even consider working. But, just how solid is your marketing strategy?
Buyers are becoming more astute these days. They want to know exactly what kind of realtor they’ll be dealing with. You may have a solid reputation, but how well are you setting yourself apart from other brokers? Are you following their lead or are they following yours? Whether you’re new to the industry or already a seasoned pro, here are some of the best strategies to help market yourself as a realtor.
People want value. More importantly, they want to make certain that an agent actually knows what they’re talking about. Generating a steady flow of content, be it a list like this or even a podcast, lets prospective buyers know just how serious you are about your business. Content gives potential interests information. It inspires confidence. And, it demonstrates the value of your work as a realtor.
We cannot stress this enough. If you’re only using social media for non-business purposes, then you’re lagging far behind your competition. Maintaining a social media presence doesn’t just increase your visibility, but it also allows you to interact with prospective buyers. It allows you to network with both other realtors as well as investors. And, it gives buyers a sense of who you really are and how you can help them find the perfect properties.
This extends to both your online presence as well as offline. We’ve seen blog posts that are irrelevant to real estate matters. And, we’ve heard horror stories of brokers offering unsolicited personal advice to customers. There’s a tremendous difference between being friendly and breaching professional etiquette. Try not to engage in the latter.
Remember, buyers aren’t only looking for a house that’s in their budget. They want to know more about the neighborhood as well, including information on its amenities, sites, and attractions. Don’t just highlight the property. Highlight the local landmarks too. A scene of a crisp autumn day in Colorado Springs can be as much of a selling point as a beautifully staged home.
Buyers don’t only want to see the exterior of a property. They want to see the interior as well as the surrounding homes in the neighborhood—even before they view the home in person. A well designed slideshow or video can often be a decisive factor in your customer’s decision to purchase prior to touring.
If your site isn’t optimized for mobile use, then you’re missing out on a huge segment of your business. In fact, it was recently estimated that nearly three quarters of the world will only be using either their smartphone or tablet to gain internet access by 2025. In a location-driven field such as real estate, making the switch to a mobile optimized site will ensure that you’ll be able to meet the demands. It may cost extra, but the results will be worth it.
Both credibility and authority are essential when marketing yourself as a realtor. While your competitors may still be content to rely on passive marketing, you want to spend your time establishing yourself as a leading voice in the field of real estate by hosting seminars and webinars for your customers. First time homebuyers in particular will have a million and one questions for you and you just might find that your personal knowledge and expertise can positively affect your sales.
Positive testimonials are effective in any industry, but in real estate they’re indispensable. Many realtors have had the unfortunate experience of receiving a bad review at least once in their lives. Maybe you have. Some people will never be satisfied no matter what you do. Testimonials both bolster your image and help to counteract negative reviews by providing a firsthand account from satisfied customers.
This is one of those old school marketing techniques that is sadly underused these days. Buyers like to feel like they’re still a person after closing, and not just a sale. A small welcome basket is the perfect way to show your appreciation. The basket doesn’t have to be elaborate, but it should be purposeful. Ideas can include gift certificates to nearby restaurants, movie passes, and discount savings coupons in exchange for spreading the word about your services.
There’s always going to be that one person who views any sort of email outreach as spam. But, there’s at least three other customers who just might be interested in what you have to say. Keep them informed of upcoming open houses, seminars, and new properties with an automated email campaign. Don’t bombard them every other day. You might find that a monthly email is sufficient. With automated tools like MailChimp and Constant Contact, the process will be easy and limited to no more than half an hour each month!
The right properties demand the right strategies—and the right expertise. If your realtor marketing tactics need sharpening, find out more at Colorado REIA.
Whether you’re a seasoned professional or an up and coming broker, one of the biggest hurdles you may face isn’t prospecting for leads. It’s prospecting for the right leads. Real estate prospecting means networking. And in today’s heavily connected world, that means leveraging every tool at your disposal. Social media. Digital advertising. Community events. Even asking for advice from mentors and your potential competitors.
It can seem exhausting, but it doesn’t have to be. No one likes chasing down leads—at first. But once you realize how creative real estate prospecting can be, the one or two hours you spend generating those leads flies by. In fact, with a little imagination and daring you just might find yourself learning to love it. Here are some tips for both brokers and investors alike.
“For Sale By Owner” homes generally mean that an owner may feel confident about their sale. They also may not realize how difficult it is to actually sell a home. Some FSBO homeowners may be in distress after job loss, divorce or other emergencies. If you’re new to a market, FSBO homes can actually mean a gigantic windfall for prospecting. Establish a personal rapport with the owners. You may find that empathy can generate better leads than expensive advertising.
Real estate groups on Facebook can range from menial but mindless fluff to groups full of valuable first hand experience you can’t gain anywhere else. Learning to discern the latter from the former isn’t particularly difficult, but knowing how to leverage your social media profile adequately can be. The National Association of Realtors has indicated that while 80 percent of realtors are currently networking on Facebook, broker presence on competitor platforms remains underrepresented in comparison. You can use this absence to your advantage, particularly in prospecting millennial buyers. The wider your profile, the greater your visibility and your authority.
There’s no doubt your social media presence is an ideal source for prospecting real estate leads. But it’s not the only one. Drive both traffic and sales by linking your social media campaigns to your landing page. You’d be surprised at how simple this process can be, even if you have little or no experience with digitally marking your business. And with the advent of cloud-based CRM systems like Salesforce and Qualtrics, automating your marketing efforts has never been simpler!
Your digital marketing presence may be seamless, but you’re neglecting one part of the real estate process. It’s based on physical property. Not virtual. And no matter how many consumers prefer the convenience of reviewing materials on the web, there’s always going to be a need for physical media. Get your face and name out there. Show your prospective leads you’re a flesh and blood person, not just a social media script spouting all the right buzzwords.
An open house is the perfect resource not only for prospecting sales leads, but for building up your network as well. In fact, research has shown that open houses generate a relatively minor number of sales. So why are they so well attended? It’s simple. Both home buyers and brokers are genuinely interested in real estate trends, and open houses provide useful tools for both industry professionals and consumers to educate themselves on new developments. They can be as much a social event as they can generate leads. And you may find the two can go hand in hand.
It may surprise you, but large local companies can be a veritable goldmine for new hires who’ll be relocating. Reaching out to their HR department to discuss helping employees transition to the neighborhood more smoothly can sometimes be as simple as sending out a mass template email—particularly if the new area has a large number of colleges and universities. Don’t think of this as selling your services as a pitch. Simply tell them some quick facts about the area and let your market pitch for you.
There’s no question that millennials represent a critical consumer segment. But very few are willing to invest in being a homeowner. In fact, only 1 in 3 according to recent research. By focusing on rentals in addition to traditional owner driven properties, you can serve this somewhat cautious segment of the population and drive business where your competitors often lag behind. With more Americans renting now than at any other point in the last 50 years, you can’t afford not to take advantage of the prospects.
We all know how critical marketing strategies are in real estate. But are they getting you the prospects you deserve? Find out more by visiting the Colorado REIA .
Most young adults are now starting to invest in properties. Buying your first rental investment is very lucrative but can be a major investment. Before deciding to jump on this bandwagon, take some necessary precautions. Take your time, do your research and read the following investing tips on buying a house that actually pay off.
Understand the real estate market. That is the first thing a potential real estate investor should learn. Get the right mortgage. By doing so, you are keeping your costs low and potentially reducing the uncertainty about the property’s cash flow. The leverage of a mortgage will help free up some of your cash investments which you can eventually use for repairs or another future investment. Remember, however, that with a mortgage comes financing costs which could be a lot higher than expected. Consult a professional before making such a huge decision.
Another investing tip for beginners is to purchase single-family homes first before investing in larger properties. It is the simplest way to begin your journey as a new real estate investor. The process and maintenance are easier compared to commercial or multi-family properties. There will be less wear and tear on the property with only a single tenant. Additionally, when something breaks or gets damaged, you only need to fix one thing.
Should you decide on using a mortgage to invest in a property, it is essential to weigh all the financing options available. Will it be a 15- or 30-year mortgage? Should you choose an adjustable or fixed rate? Check online marketplaces that allow you to compare offers and rates quickly to find a suitable one.
Most experienced real estate investors state that the best way to reduce risk and increase your chances of success is to ensure that you are investing enough money to be cash flow positive. Leave margins for errors to cover unexpected expenses. This will also allow you to weather through difficult economic times. If the property cash flows, market fluctuations will be irrelevant and you can hold those funds for a longer period of time.
For first time investors, it is ideal to invest in a property located in an area with a higher return on investment. There are amazing deals on transitioning or in re-established locations. Study the areas available for you. Do thorough research. To achieve the highest return on investment, you must know the location really well and what types of houses are selling in the neighborhood.
Purchase a property in a location and niche you are familiar with. Ask around or draw from previous experiences to gain a competitive edge over your competitors. Let’s say you are a veteran. It is ideal to buy a rental property near military bases for military transfers. If you are a medical practitioner, buy a property near hospitals in your area. If you are a university alumnus, purchase one near local campuses.
A good marketing strategy will give you a good ROI quickly. When you purchase a vacant property, it is important to find tenants as soon as possible. Before investing and putting all your hard-earned money on a rental property, make sure you have a good marketing plan. If your property is vacant for a long period of time, it will eat up your cash flow. Online real estate marketplaces are the best places to choose when advertising your rental property.
Purchase a property and make improvements that you see fit for your ideal renter. Make improvements suitable for them. By targeting the appropriate renter like students, families, young professionals, vacationers, or retirees, you are getting the most value out of your money.
The bottom line is to always do your research. Know the neighborhood you’re going to buy in. Know what types of properties have sold before.
For more tips on how to invest in a property that can pay off, visit Colorado REIA.
Paying off your mortgage early. It sounds like fairly shrewd advice. Especially considering that most homeowners have a problem with visualizing their mortgage as nothing more than an ever spiraling money pit.
But paying off a mortgage isn’t always practical. Or effective. In fact, for most homeowners it may seem next to impossible.
It’s been estimated that only 34 percent of Americans have fully paid off their mortgage to the point where they have 100 percent equity in their home. They’re lucky. An increasing number of homeowners are applying for loans with alarmingly high debt to income ratios. And while it’s tempting to own your home free and clear in an investment period marked by independent entrepreneurship and a highly volatile stock market, it may not always be the wisest idea. Like everything in life there’s as much risk as there is benefit to paying off your mortgage.
Still, it’s perfectly normal to have a dream. That’s why you bought a home in the first place. If you’re one of the millions of Americans considering paying off your mortgage early, here’s what you should know about the pros and cons.
There are hundreds of ways of tapping into additional cash reserves, no matter what your needs are. And investing in the real estate market has always been a cornerstone for budding entrepreneurs. After all, it’s why we formed our association. But consider the very real cost of the market.
Inflation’s a great example. The only thing it diminishes is your cash value. And the only thing that accumulates faster than inflation is property costs. By paying off your mortgage early (as opposed to saving), you’re not offered much of a buffer from both.
But maybe you’re not a real estate investor yet. You’re just an average homeowner looking to take an incredible leap. Your mortgage payments are a risk free form of investment. It quite literally reduces your risk load, whereas money placed in high venture stock market gambles aren’t necessarily going to yield the returns you once hoped they had. Let’s look at how you can turn mortgage payments into an investment.
Most homeowners don’t stop to consider what a potential cash cow their home can be. It might be a huge source of funding for their banks and realtors. Just not themselves.
An astonishing 36.6 percent of Americans currently rent their homes and apartments. And that number is only likely to increase. Only 37 percent of millennials—the largest American generation in history by far, numbering at some 75 million—are homeowners. Some have cited student loan debt. Others attribute it to uncertainty about the global economy. But the need for shelter, the cost of living and investment opportunities have never been higher.
There’s a reason why many Americans view apartment rental agencies in an exceedingly negative light. While many are no doubt reputable, many are run by fairly unethical individuals. Subsequently many are looking at renting single and multiple family homes from property managers they know, trust and can establish a working relationship with. Shouldn’t all that money you’ve spent on refurbishing and remodeling actually pay you back without having to sell your home—particularly in an uncertain market?
Let’s face it. Interest rates on your mortgage are probably more than you’d like them to be. They’re more than most Americans would like them to be. And there’s always going to be a need for additional cash for emergencies. So it only makes sense to free up the equity in your home, whether it’s through refinancing options or paying off your mortgage early.
But there’s an additional bonus to paying off your mortgage. Unsecured personal loans are risky business. Not only do they put you at greater risk for liens and come with absurdly high interest rates, but they can come with a drastic risk for fraud—an estimated $905 million in 2017 alone. Cashing out your home through a home equity line of credit may temporarily increase your interest rates, but you’ll have a much greater sense of security in the long run.
Maybe your lifestyle is fortunate enough that you can afford to pay off your mortgage early. Maybe it’s secure enough that there’s a much greater safety in doing so compared to the actual risks. Or maybe you are in dire need of emergency funds and it’s one of the few avenues left for you.
Real estate investments have come a long way in the past twenty years. The demand for commercial real estate is booming. House flipping isn’t just making a comeback… it never went away. And investment opportunities in the market have never been greater. Sometimes you find them where you least expect them.
Right in the comfort of your very own home.
If you’re ready to get serious about real estate investing, Colorado is the state to do it—and we’re the professionals who can guide you. With close to 75 years of combined experience, the Colorado Real Estate Investors Association presents you with the insight and resources only three investors who have brokered over 2,500 deals can. Real training. Real success. And real money. That’s the Colorado REIA difference. Find out more at coloradoreia.com or call (303) 816-3653
“If you’re so smart, how come you’re not rich yet?” It’s a common adage that many budding entrepreneurs hear during the course of their everyday conversation. The usual retort, of course, is “ I’m getting there!” And hopefully? You are. But if you’re a real estate investor, all you really have to do is show doubters your property portfolio. Typically, that puts such cynicism to rest. And with good reason. After all, shelter is of the great vital necessities in life—even in commercial real estate. And opportunities are in plentiful demand. But it’s a high risk gamble. It’s been estimated that 28.1 million Americans consider themselves real estate investors. And with that number, the obstacles facing entrepreneurs can be relatively high. It’s no longer enough to seize what looks like a great opportunity when 2018 reported a decrease of approximately 7.7 percent in sales of new single-family homes and 10.3 percent in existing homes. That’s the bad news. The good news? With a strategy emphasizing foresight and care, you can eliminate the chance of loss and increase the chance of return. Here’s some of the best tips for entrepreneurs looking to invest in real estate.
It’s one thing to have a general understanding of how real estate markets operate. But it’s another thing to have an understanding of market performance in specific metropolitan cities. And market performance can be predicated on several factors, in addition to historical sales:
If you’re just beginning to look at real estate investment, it’s important to remember that historical sales are never constant. They don’t just change annually, but month to month. What might seem like an ideal opportunity in a buyer’s market could turn out to be the result of high risk potential in any of the preceding factors. Review your targeted neighborhood carefully. Sometimes even high opportunity zones can yield negative returns if businesses choose to invest elsewhere.
In particular, both vacancy rates and construction rates. A general rule to keep in mind is the higher the construction rate, the higher the price range. Frequently, this is a result of a higher demand in up and coming neighborhoods. But the opposite holds true for vacancy rates. Generally speaking, more vacancies in a neighborhood means lower rates. More often than not, this can be due to a large amount of foreclosures—as witnessed in the 2008 housing crisis. And while it might be tempting to take advantage of low priced properties in distressed neighborhoods, keep in mind the sustainability of your investment. Higher vacancy rates exist for a reason, and you won’t necessarily find many interested buyers regardless of the refurbishment you may have conducted.
One area that many beginners in real estate investment frequently overlook is the cost of auxiliary materials. That can include marketing, construction, attorneys, inspection services and title insurance. All of which can wind up costing you more than the bargain you initially anticipated if you’re not careful.
“Early on, I made the mistake of hiring a home inspector who later turned out to be less than reputable,” explains Alex Forrest, an investor from Salt Lake City. “And unfortunately, he recommended some area contractors who ultimately billed me for renovations and repairs which turned out to be entirely unnecessary. Not only unnecessary, but entirely too lengthy. By the time they were finished, I was out $30,000—in addition to legal fees. All on top of a home I thought I was only paying $175,000 for!”
While disreputable contractors are unfortunately not an anomaly, that doesn’t mean you won’t find ones who are not only trustworthy but consistently deliver craftsmanship. You’ll want to review their portfolio. You’ll want to see examples of their work. And you’re definitely going to want to ensure they’re registered with the Better Business Bureau and have necessary certification for residential property renovation.
More importantly, you should look for a mentor who can guide you through the process of investing—particularly if you’re just beginning a career as a real estate investor. Not only can they provide invaluable advice on what to prepare for, they can act as a referral service for brokers, realtors and attorneys who are both reputable and can find you ideal properties at an ideal price.
As we said, shelter is a vital necessity and ideal investing opportunities are in high demand as a result. So are risks. But with some forethought, you can minimize the pitfalls and wind up not only on top but on your way to being a successful real estate entrepreneur. Here’s hoping you simply don’t stumble more than you have to.
Are you serious about a future in real estate investing? The Colorado REIA is the state’s premier investment association, providing coaching, guidance, workshops, networking opportunities and a host of other exclusive member benefits. To find out more, visit us at https://coloradoreia.com/ or call (303) 816-3653
Real estate has been making news for the last few years – good and bad. Many have considered investing in real estate an ideal long-term investment. Property values increase over time and generate passive income along the way. With the right kind of wealth building and investment strategies, it is possible to profit and build real wealth through property investments.
It may not be a simple process, as building real wealth takes many cycles. You cannot simply sit and relax and watch the money roll in. Good investment strategies involve having a set of sensible approaches, from identifying your needs and developing a program that works with your plans.
Here are a few wealth-building strategies that will help investors – new and experienced – achieve their end-goal
As one of the most common approaches being practiced today, home ownership has become a motivating factor for many. It serves as a base while you continue to live your lives. Owning a home, when held and sold, serves as capital-gains tax-free profit. Properties appreciate over time, so when the time comes that your children move out, you can sell the bigger home and settle in a smaller one. That leaves you with a bigger return on investment, and you can use the equity from the sale to start on other investments and earn income.
Invest in a budding real estate market. Research where most young people move to nowadays. These are the markets where the value in that area will increase as its residents’ earning powers increase. If you realize that rents go up drastically, do not sell your property. Instead, rent it out and use your property as an income-generating property. The money will continue to roll in and you can use the profits for more investments.
The essence of true wealth is not just about building stock portfolios or money. In achieving lifelong wealth, one needs to understand and discover their “whys” and use it to help others. It should be your passionate motivation and life’s purpose. Planning is key, especially if your “why” leads you to launch or invest in a business. Look at all the resources available to you and have a clear idea of your goals, as well as an exit strategy.
Most successful entrepreneurs build and shape the purpose of their business by fully understanding their journey, from start to finish. Success metrics are something that can be measured; otherwise, it will be difficult to manage your investments. Once you have a clear understanding of your “why” and learn to empower people along the way, real wealth will soon follow.
The real estate market may not be as booming as it was before. However, one of the best investment strategies to build real wealth is by investing in properties you can actually rent out. In reality, no matter how good or bad the economy is, people need a place to live in. Apartments, condos, duplexes, single-family homes, and townhouses are easy to finance, sell or rent. In the event of a downturn, these properties still maintain their value.
Another reason why this is a good strategy is that residential properties offer more flexibility than any other kind of real estate. For example, if you lose a tenant in a commercial real estate, the value of your property goes down. A residential property, on the other hand, holds and even increases its value, rented or not.
This strategy is almost the same as property development, where you buy a building and build two or three dwellings to sell, finance, or rent out. In this case, you need to build a second dwelling or a granny flat on a property. You can partition an existing residential unit and create two dwellings. This gives you two rental incomes from one property. This is one of the wealth-building strategies that is considered a high-yield method because it has an opportunity for strong capital growth once sold.
Investing in high scale markets like real estate always involves risks and has a potential for financial losses. Before making such a huge decision, always seek professional advice and guidance from a licensed and accredited financial advisor.
Contact us at Colorado REIA for more information how to build your wealth and live a happy and financially stable life.