The Real Estate Sales and Brokerage industry is a big market, estimations show it’s over $160 billion in size, and over the last five years it’s grown by 2.6%. For anyone looking to get involved in the real estate industry, there is a great deal of potential for business, specifically real estate investment. This article will discuss the primary types of real estate investments and tips to get started.
Real Estate Investing consists of various processes, like ownership, purchasing, renting or selling property (or land) to earn a profit. There are different real estate investing options, some of the more well-known investment strategies are, Buy and Flip, Buy and Rent, and Wholesaling, these are discussed in more detail below.
Buy and Flip
A Buy and Flip real estate investment business consists of buying a property at a low price and rehabilitating or renovating it to sell at a higher price. There are a few steps involved to start, most importantly, having a business plan and structure.
You will need to determine what your business needs are, this can be done by looking at the different types of business structures and what they offer, these are, namely, Sole Proprietorships, Partnerships, LLCs, and Corporations. The business structure will also determine how you are taxed, as well as liability protection.
A next important step is to know where your capital will come from, this can either be from a bank loan if you qualify for one as a new business, family or friends might be in a position to loan additional funds, other forms of funding could come from private savings or even traditional mortgages. It’s recommended to do adequate research beforehand to ensure you are safeguarded financially.
Where will you start flipping properties? It’s recommended to conduct market research in areas you already know like your local community or state. You can enlist the help of a realtor or wholesaler, a ‘bird dog’ (someone who will find a property for a finder’s fee), or, you can do it yourself.
When you find a property you would like to buy, your next step is to create an offer contract to present to a possible seller, which includes costs and any other terms and conditions. The final steps after purchasing a property involve rehabilitating it. A contractor will need to assess the condition of the property, as well as sign a contract that stipulates the details of the rehabilitation.
Buy and Rent
A Buy and Rent investment plan similarly involves purchasing a property at a lower rate, rehabilitating it, and renting it out to earn a profit, or monthly income, with minimal required maintenance. Start with your business structure, an LLC is recommended due to the easy setup.
You will need assistance from various professionals during the purchasing process, these include a real estate attorney to evaluate the property, mortgage officers to help with funding, contractors to evaluate rehabilitation and repair costs, and a property manager to assist with renting.
Real Estate wholesaling involves purchasing discounted off-market properties to sell or allocate to another real estate investor. After establishing your business structure, it’s important to have an offer contract drafted by a real estate attorney. This contract will give you verification to market, allocate ownership, and show the property.
The offer contract will be given to the homeowner, as well as potential buyers, who can be real estate investors interested in buying or renting property. Additionally, once the contract is agreed upon and signed, the assignment contract will transfer the property to the new owner, including important terms and conditions, and the wholesale fee. Before the final handover, there will be an escrow period to ensure financial safety for both parties.
Real Estate Investment Tips for Beginners
For anyone starting in the real estate investment business, it’s important to research about the market and properties available, and where you decide to focus your attention. Considering insurance and liability, for example, Homeowners and Landlord Insurance, is crucial when dealing with the selling and buying of properties. This will safeguard you and the buyer.
Knowing why you want to do this is also important and remaining focused on the primary goal of acquiring a property for the purpose of selling or renting it. To minimize costs and potential pitfalls, avoid properties that will take too much time and effort to renovate.
Ultimately, it’s about starting a business and covering all your bases as an entrepreneur; as TRUiC’s CEO, Nagabhushanam ‘Bobby’ Peddi, says, ‘we have all the free guides, legal templates, and links to the resources people need to be successful entrepreneurs’.
Visit TRUiC’s website for more information and free guides about home investments and how you can start your real estate investment business on sure footing.