Opinions expressed by businesstraverse.com contributors are their own.
It is very tempting to overlook certain details as they can make the difference between a high return investor and a regular investor. If you want to be a high return investor, follow our advice. At first glance, the five points discussed in this post may seem too simple, but they are the basics you need to know to get started under the right circumstances. Don’t make the mistake of ignoring these tips when investing in real estate.
1. Determine your strategy
Your strategy forms the basis of your project. With a solid strategy, you can stay on track, achieve your goals and not spread yourself too thin. This step is very important, because in order to successfully carry out your investment project, it is necessary to ask yourself the right questions beforehand and be well prepared. When you invest in real estate, when you rely on the bank or other financing organizations, you are usually committed to the long term. It is therefore of prime importance to weigh up all the risks and choose a strategy that suits your situation. Setting up a good strategy requires solid knowledge of the sector. To speed up the process, it is essential to be trained in the subject.
Related: 8 Proven Ways to Make Money in Real Estate
2. Determine your budget
In this area, it is very important to set your budget in advance and stick to it. Real estate is a very expansive area that has the advantage of being accessible to most budgets. If you’re on a budget, you can start with a parking space, a basement, or even a cheap apartment. As your budget increases, you have more choice. And here you have to choose according to your strategy so as not to spread yourself too thin.
For example, if you want to increase your ability to become an annuitant and live off real estate, a rental home remains the best investment to choose. There are several options: In addition to traditional rental, you can also use other types of rental, such as seasonal rental, sharing a house or apartment, to increase your cash flow. It is also possible to profit from a resale after a renovation. As you can see there are many possibilities, but it all depends on your strategy.
3. Build a team
You know that a real estate purchase cannot be done alone. You will have to work with several people to find the rare pearl. It is therefore important to assemble a team that will help you acquire your property in the best possible conditions. When searching for your real estate, you can choose to rely on real estate agents, sellers, or bailiffs (some bailiffs have access to a list of properties for sale). For the financing of your real estate you will have to deal with a bank or a financing organization and also with a notary.
You need a chartered accountant or a tax lawyer to calculate the profitability and to choose your tax regime. For renovation and various works, you need to work with a contractor, plumber, electrician and craftsmen. The rental management can be done directly by you, but if you don’t feel like it, it can be delegated to another organization. To make sure everything runs smoothly, having a coach to guide you through your project can be very helpful, especially if this is your first investment.
Related: 4 Reasons Building a Real Estate Team Is Necessary to Survive in Today’s Economy
4. Buy with the aim of making money at the time of purchase
When investing in real estate, you should put all your emotions aside in your decision. Many people forget that the deal is made at the time of purchase and not the time of resale. They act according to their desire for something, which is only emotional and not born of a deliberate decision, leading to the purchase of a property at a price that is often higher than the market price.
In general, when buying this type of property, these people think it doesn’t matter because they sell the property for double that five years later. But nobody knows what will happen in five years! However, what we can be sure of is that high acquisition costs will affect the profitability of your project. In the same perspective, it is advisable to negotiate (within reasonable limits, of course). Keep in mind that the first price offered by the seller of a home is often overestimated, as there is room for negotiation.
5. Be patient and persevere in your quest
Finally, you have to be patient. Finding a property that matches your goals can take time. One of the biggest mistakes new investors make is rushing to the first property they visit, even if the costs are too high and the property doesn’t fit their strategy. Some people eventually give up after a few months because they have not found a property that is profitable enough. Likewise, expanding your wealth takes time. Contrary to what is conveyed through the media and the success stories, wealth does not come overnight, it takes time. And for that, you need to follow a well-defined strategy.
Related: Creative Financing Strategies for Real Estate Investments