Many investors these days want real estate to be in their investment portfolios when they actually are not even aware of complexities associated with it. It’s substantially different when compared to the investments made on stocks. However, one great thing about real estate is that, even in a bad economy, it proceeds in a better way when compared to stocks. After all, land is a finite resource, and people need a place to live, work, play and shop.
So, real estate is basically a matter of demand and supply. Despite the occasional slowdowns in the economy, real estate continues to be appreciated; in fact, it’s proven to be one of the best ways to create wealth, even if the investor is not a genius or a millionaire. But, you need to know a few things before getting started with your investment on real estate.
1. Know the Basics of Real Estate: Regardless of the field, you absolutely need to know the basics when you are taking up a new venture. So, make sure that you do some research before you get into the field. Having a predefined set of goals will always make the process much straightforward. Also, it makes it really easy for you to get tied up with the research and know more about the field.
2. Plan out your Financial Goals: Always do a thorough analysis on your financial goals and determine what you expect from your investments. We often go with the “time vs. money” concept; the more you have one, less you need the other to reach your financial goals. So, don’t just shy away to take your time to understand your goals. If you are not sure about the ideas to create your financial goals, seeking the help of a financial advisor could be an excellent first step.
3. Look at Plenty of Properties: Many investors buy the properties at their first glance just because they look nice, or they don’t want to take an effort to look what’s really out there. But you need to remember the fact that you are not going to live there, so don’t just make decisions based on your own preferences. Provide yourself a wide range of options to choose from, and then narrow them down based on the goals you have set for yourself, so that you’ll not fall into a trap easily.
4. Do a thorough Financial Analysis: Be very realistic and look for different alternatives to determine which property makes the most financial sense. Never buy a property for a higher price. You need to be aware of the sellers who try to over-estimate the value of property through pro-forma. You can definitely start your conversation with reference to the pro-forma, but make sure you know the actual numbers before closing the deal.
5. Don’t try to buy when the seller is not motivated: It’s very true that you are not very likely to get the price best aligned with your financial goals, when the seller is not motivated to sell the property. But how to know if the seller is motivated or not? Just look at the asking price! For instance, if a property is being in the market for quite a long time with no price reduction at all, clearly the seller is not motivated to move the property. And, if the property has been in the market and has had its price down considerably, the seller is most likely to do anything to get the property off his/her hands.
6. Difference b/w Real Estate Business and Real Estate Investment: If you are an entrepreneur, you need to understand that, you already have a business and you interest on real estate investment is just to support your core business and not to replace it (unless that’s your intention). Don’t just get caught with the transactions so much that it falters your core business. If it happens, it takes lots of efforts in a bumpy road to get back to the stability.
If you are really interested to stay ahead of the taxes and inflation, and if you are planning to build security for future, real estate is probably the right choice for you. If it’s done correctly with proper guidance, investing on real estate is one of the best and safest long-term wealth-building plans in the world. Harder you work and more the efforts you put, greater will be the reward over time.