There is no doubt that real estate is one of the best investment opportunities out there. Whether it’s your primary business or a side hustle, it is an industry where assets grow at a faster rate than inflation. Likewise, short-term income can be very pleasing too.
However, the possibilities should not fool you into thinking the road ahead will be easy. If it were, everyone would be making a fortune from it. Before building your empire, you must first prepare in style by conducting your research. Use the six questions below for guidance and you won’t go far wrong.
#1. How Will You Fund The Real Estate Purchases?
Real estate assets open the door to many possibilities. However, funding them can be a very big stumbling block, especially early on. After all, millions of people struggle to get a mortgage for their own properties without looking at investments in this arena. A DSCR loan could be ideal if you are self-employed or working in a partnership. They do not assess affordability based on personal income, which can give you a far better chance of approval. The process is streamlined too.
For most investors, the goal will be to have multiple real estate purchases. So, knowing how to fund them will be essential. Once you also have income streams coming in from assets, there will be no looking back.
#2. What Is Your Main Strategy?
Knowing that you want to make money from property is one thing, but knowing how to do it is another altogether. Some investors like to opt for traditional landlord duties. This results in a steady flow of income while the real estate asset will increase in value over the years too. Others may look for short-term rentals aimed at holidaymakers or traveling workers who will pay a higher nightly price. Alternatively, flipping properties and property development are options to consider. This makes money from assets quite quickly.
You may also focus on commercial lettings to businesses. Over time, you may grow a diverse portfolio that covers many bases. To start, though, it makes sense to have a niche and master this to become profitable.
#3. What Type of Properties Will You Opt For?
Once you have determined how you want to make money, you can start to think about the assets. If looking to become a landlord, multifamily residential properties may stand out as a good option. You will only need to fill a percentage of the dwellings to break even, which means lenders will be more likely to approve funding. Likewise, the logistics of having several tenants in the same place are quite pleasing. The maintenance of communal areas will serve everyone too.
If looking to flip properties for profits, fixer-uppers will be your main goal. They leave you a lot of room for strong ROIs once you’ve completed the necessary upgrades. You may also find that auctions are a useful option.
#4. Where Will You Invest?
Another big question relates to the location of your investments. On the one hand, it makes sense to stay local for logistics as well as your knowledge of the arena. On the other hand, though, upcoming markets may offer opportunities for quicker growth. Modern communication tech makes it easier to manage assets in any location, so you can cast your nets further afield. Still, it should be noted that there are other issues that you will need to consider.
If looking at a different state or nation, you will need to look at the tax situation. Likewise, there may be regulations on ownership by international investors. In short, you must research the circumstances of any location before diving in.
#5. What Are Your Exit Strategies?
When starting your real estate investment journey, you will naturally focus on how to acquire assets. However, it is equally crucial to consider exit strategies. Knowing how to find the right buyer for real estate, for example, can maximize your sales. Meanwhile, you may need to set targets of when to think about exiting a specific investment. After all, timing the exit on one asset could be the key to facilitating your next move. Conversely, there may be a time to cut losses on an asset.
In reality, you will probably deviate from your plans from time to time. Nonetheless, feeling organized will keep you on a smoother path. Moreover, it reduces the threat of unforeseen situations emerging in the infancy of your journey.
#6. How Active/Passive Will You Be In Managing Assets?
Finally, you must consider the ongoing management duties and determine how active you want to be on this side of things. The great news is that help is now available from many directions. For starters, estate agents can manage monthly rental collections from tenants as well as viewings on assets you wish to sell. You can also hire management companies to take care of your short-term rental properties. Help is available on whichever path you take in the real estate investment sector.
While those services do cost money, they will save time and enable you to manage more properties simultaneously. Learn to strike a balance between the two and you will be destined for optimized results.
