After a long period, where the real estate world was affected by the global crisis, it seems that the Real Estate Business is finally rebounding. And it is an excellent time to start in the business and take the first steps in the field. This article is all about, How to Start a Real Estate Business?
This year is expected to increase real estate movements in all over the world by 30%, which seems to be an excellent year for this business. But before you start, you should know that if you want to make money in this business, you must have a future vision and understand that it is an industry that is prone to ups and downs. In many places, house prices and rents are often stagnant for a long time, so you’ll have to be a great strategist to be successful in this business.
In spite of that, in the last years the real estate businesses have proven to be safe investments, since the properties are valued much every year. Although, many times it is not as safe as it seems so you should first analyze all your investments, because the value of the property will depend on many factors. Where the main factor that determines if your investment is a big business, is the area where the property is, so you have to be attentive to that.
So, if you are still interested in getting into real estate business, read our six steps to start the business successfully:
- Develop a Real Estate Business Plan:
That’s right, if you have in mind starting a real estate business; whether part time or full time, you must make a business plan to be able to develop your business successfully. In a plan, you must establish the main priorities, your goals and all the details that are of paramount importance for your business project to succeed. As well, you should note all the achievements that you are doing step by step. This way, you will be much more organized and you will be able to do all your tasks, without skipping any.
- Buy to rent or buy and sell?
One of the objectives that you must have in mind when making your business plan is what will be your main exit strategy, your plan will be to buy to rent or buy and sell? Buying to rent is a long-term strategy, which allows you to build a list of properties and make a monthly income. In addition, you can mortgage the house to continue with the project and pay it with the rental income.
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In terms of buying and selling, it is one of the most used strategies, because it is a short-term business and allows a return of capital quickly + profits, although it is the riskiest option.
There is also another alternative, which consists of talking to direct owners who want to sell or rent a property and offer such properties under their real estate name. In this way, you will take a percentage to make the sale and also to perform the transfer procedures.
- Rent performance and return on investment
If you have opted for the strategy of buying and renting, you should know that rent performance will be an essential part, even if you will sell the property, so you must be prepared for a volatile market. Rent performance is usually calculated by measuring the annual income that rent gives, against the value of the property. Where 10% to 15% is considered to be an excellent gross return, which may increase according to the strategy it raises.
You should also pay attention to your future tenants, because if they are not the right ones, they can cause great headaches. So, ideally you create a clear contract, through a good lawyer, with that you can avoid future problems, if your tenants proved to be problematic.
Location is fundamental to real estate business, so you should not make the mistake of buying property in areas of decline. You should be able to detect areas that are in full growth and buy early; with this you will be able to obtain large profit margins. So, look for growth areas, where there are other developments or places that are being urbanized.
- Do not over-invest:
For your real estate business to succeed, it is essential that you make sure you buy at a reasonable price. Therefore, conducting a market study will help you make good investments and avoid losses in selling. You should inspect every property you buy, structural or plumbing problems can cause very large losses.
- Time is important:
It is very important that you stay calm and do not rush into property purchases. You should analyze all the options and opportunities offered before investing, because many times the people around you can influence you to invest in bad business. Now, when you have analyzed the property and if it really is a big business, you must act quickly. Because the faster you invest, the faster you can generate profits.
These were the six vital steps on How to Start a Real Estate Business. Remember that in real estate business it is very easy to earn money, but it is also very easy to lose, so you have to take it seriously.