Most real estate agents and investors have a college degree despite the lack of real estate as an area of focus. There is the option to major in marketing with a minor in real estate investment, but those opting for that route are few and far between. The reason being is that a degree is not specifically needed to be successful in real estate investing.
Why should entrepreneurs invest in the first place? The answer is: to have enough money to live on when they no longer can or wish to work. To put that money aside, however, it requires one to accumulate enough to offset inflation and taxes that would erode savings. And for that purpose, real estate is an excellent solution.
The great thing about real estate is that even in a bad economy, it will usually fare better than stocks. Land, after all, is a finite resource. People need a place to live, work, shop, and play. Hence, real estate is definitely a matter of supply and demand.
What’s more, real estate will continue on an upward trajectory despite occasional slow-downs in the economy. In fact, it’s proven to be the best way to create wealth, and an investor need not be a genius or a millionaire to succeed. Here are some tips, then, for entrepreneurs on getting started and succeeding in real estate investing:
Quit waiting for the right time.
Much like the stock market, in real estate we’re always skulking and waiting, ready to pounce on what we believe is the perfect time to jump into the market. I’m here to tell you — don’t keep waiting. You can spend the next few years waiting for the perfect time, but if you have the startup funds and are eyeing a particular set of properties at a good deal, it’s best not to wait.
Start out simple. Buy one or a few properties and go from there. The earlier you begin investing, the sooner your properties will begin to appreciate and, in turn, provide you with more capital to start your next venture.
Begin investing as soon as possible
It’s perfectly fine to begin investing in smaller, low-end properties — but that’s not how you build an empire. As soon as you have the hang of investing, don’t hesitate when it comes to acquiring larger properties. Larger assets tend to appreciate faster and can be more beneficial to your portfolio as opposed to smaller, cheaper properties.
When considering if you should go big in real estate or return to the stock market, there are two more things to consider: 1) Properly investing in the stock market will cost you on average the same as investing in real estate, and 2) In real estate, even when the market crashes, you will still have a tangible asset to salvage. Of course, there are many other nuances when comparing the two, but to become a real estate mogul — you’ll have to stick to real estate.
Manage your cash flow
When starting with real estate investment, there are four ways you can look into and work on to eventually achieve financial freedom:
- Real Estate Appreciation – This happens when a property’s value rises because of a change in the market. If you bought a property situated in a piece of land that’s becoming busier and more commercial, you might notice an increase in the property’s value. Selling your property investment at the right time and when demand is high can give you an excellent return.
- Cash Flow Income – This focuses on buying a property like an apartment and turning it into a rental property that you can manage. This can give you a stream of cash from tenant rent. Other properties that can provide you with this type of income include storage units, offices, retail buildings, and the like.
- Real Estate-Related Income – This type of income is common for specialists in the industry, as brokers. They make money from commissions. If, later on, you find that you have a knack for real estate and decide you should pursue to become an agent or expert in the field, you can help other investors on their journey and earn from it.
- Ancillary Real Estate Investment Income – This type of income comes not directly from the property you purchased but rather from the different income-generating machines or avenues within the property, such as parking fees, vending machines, a laundromat within the apartment complex, etc.
Don’t sell appreciating assets
When we’re young, we tend to be quick to sell in hopes of making a return. This is the worst thing you can do in densely populated areas or up-and-coming cities. In these hot markets, the longer you wait to sell, the better. Across the country, in places like Seattle and Houston, many properties have doubled in value over the past three years.
Many of these properties will continue to appreciate, so determining when to sell is more complicated than simply seeing a slight return. Keeping track of market forecasts will help to determine when it’s time to sell. This is also something that will be learned with experience.
Focus on investing
As an investor and entrepreneur, you should always be on the lookout for ways outside the obvious to improve your return. When using personal funds to invest, the best way to do it is through a self-directed IRA. A self-directed IRA is the same as the usual IRA, however, it allows alternative investments for your retirement savings. By investing through an IRA, you can avoid using your taxed income. Most banks have this option, so it’s best to speak with a financial advisor before diving in head first with this kind of investment — and remember to leave yourself with something for retirement.
Bottom line
Save yourself some trouble and remember these rules along with the basics when you’re in the beginning stages of real estate investment. With so many details to consider, these simple rules can easily be overlooked.
