Real estate investment is easier than you might think; if you plan properly and get started in a timely manner, that is. It’s important to live a life of financial freedom to provide not only for your family but for yourself as well. One of many great ways to achieve this is via real estate investing.
Real estate investment is also a fantastic way to diversify your portfolio and grow your wealth. If you’re new to the world of real estate investment, here are some tips to help you get started so you can achieve that fabled financial independence!
1. Identify Your Financial Stage
Eventually, you’ll have to create some equity and start saving up if you want to build wealth effectively. There are 5 stages that you need to know where you stand financially: survival, stability , saver, growth, and income and withdrawal stage.
These stages are loosely related to your wealth that you’ve accumulated at points in your financial life cycle with the end goal of turning said net worth into income and a stable portfolio to make early or regular retirement possible whilst living comfortably. Hence, understanding your current wealth stage is vital in order to proceed to the next stage.
2. Choose a Specific Real Estate Investment Strategy
Don’t be overwhelmed by the myriad of investment strategies available to invest in real estate. Instead, choose a specific real estate investing strategy so that you can build that confidence to get started.
However, you should always identify what your financial stage is before choosing an investment strategy. Some strategies may be a perfect fit for your financial situation whereas others might not be achievable just yet.
Stage 1 and 2 (survival and stability)
Your main strategies for stages 1 and 2 are earning extra income and learning about the basics and the ins and outs of real estate while avoiding losses.
Stage 3 (saver)
The objective is to dramatically increase your savings rate by reducing expenses and/or increasing income.
Stage 4 (growth)
Your main goal here is to grow your net worth by making worthwhile investments.
Stage 5 (income or withdrawal)
By this stage, you’ve already understood where you need to turn some of your existing wealth and equity to generate more income with less hassle and less risk. In addition, you’ve accumulated a large enough net worth to be financially independent and to enjoy an early retirement!
3. Pick a Target Market
For starters, it’s recommended that you evaluate a target market that’s preferably near your residence to invest in. If prices seem too high in your local neighbourhoods, do venture out of your core market and look for other potentially high yielding markets elsewhere.
Consider factors such as location, condition, and potential for appreciation when selecting a property. It’s also helpful to work with a real estate agent who has experience in the local market and can help you find the right property.
Do pay special attention to prime properties as their value will continue to rise and high rental rates are virtually guaranteed due to its ease of access to facilities, amenities and convenience such as public transportation!
4. Decide Investment Criteria
Once you have a good understanding of real estate investment, it’s time to create a plan and set your investment goals. Determine your budget, risk tolerance, and investment timeline. Consider the type of property you want to invest in, whether residential or commercial, and choose a location that has the potential for a high return on investment.
In real estate investing, it’s recommended that you create a written investment profile, which can be shared with any potential partners or investors who are going to bring you property leads.
The profile should list the target property that you’re looking for. Secondly, list the target terms to know what kind of property you want and what kind of numbers or metrics would make that property a good deal.
5. Build Your Team
Real estate is first and foremost a team sport. Whilst a team is vital to the success of your real estate investment business, you should still be mindful of your business’ financial capabilities and not to hire too many employees especially if you’re just starting out.
Instead, hiring independent contractors such as repairmen, CPAs and attorneys will bring value to your business while saving on hiring costs.
6. Look Up Financing Options
There are many financing options in real estate as compared to other forms of investing such as mortgages, using cash, or partnering with other investors. The type of financing you choose will depend a lot on the prior steps which includes your financial situation, strategy, and risk tolerance.
7. Raise Cash & Reserves
Although it’s tempting to use high-leverage scenarios, relying solely on no-money-down strategies for your real estate investment business is risky, and it’s wise to save cash for reserves. The amount of cash you need depends on your strategy, pricing, and property criteria in the market that you’re going after.
Therefore, you need to always have money available in order to purchase good deals. In addition to that, getting a partner who puts up cash for down payment and clear communication with each other is also important to achieve your expectations and goals.
8. Create a Plan to Find Deals
A recommended plan is to create a budget for marketing to buy up good deals and create some marketing campaigns to bring in more of those deals. It’s especially important to be creative when planning and creating enticing marketing campaigns as opposed to the futility that comes with throwing money at a poorly-designed campaign especially when you have a limited marketing budget.
On the other hand, if you have a sufficient budget and are willing to spend on marketing, you probably have enough to create a decent marketing campaign(s) to help you buy more deals.
9. Schedule Time & Prioritize Next Actions
This step is to help you keep all the information organized and effective, and take action on it. After you’ve scheduled time for your work, the next step is to prioritize the next action that you’re going to do within that period of time. Action management is not the same as time management, therefore you want to spend your time only doing actions that will progress your goals. Prioritize some actions and de-prioritize others.
Becoming a real estate professional will be easier if you follow the above steps as well as familiarizing yourself with the procedures. Be sure to review your financial situation and define your goals to achieve success and become financially free.
Looking to learn the ins and outs of real estate? We at Juwai IQI are here to help you hone your skills. Join us today!
