This article is primarily for people who have never invested in real estate, but some already in the business might also find these tips useful.
Firstly, you’re going to need money to buy the properties, so you’re going to need a partner or investor. The partner provides the capital, you do all the work, and you share in the profits… fair is fair. Before anyone invests in you, you need a company, which isn’t free, so you’re going to have to scrape together a little money. You cannot start from absolute zero so understand what little money you can spare you will have to give up. Get your license, build your website, research properties for sale, calculate the cost of renovation, advertising, and check the markets for competitive products. You’ve run the numbers, profit looks possible, time to go to your investor with a proposal. If he agrees with your assumptions, you’ve got the money. Welcome to the real estate industry!
This is something that will be ongoing throughout your entire life and career. Getting to know lots of people in your industry and filtering out those who can’t be relied upon is paramount. Build up your resources – decorators, carpenters, plumbers, electricians, landscape gardeners, lawyers. Meet with them, talk prices, get to know them.
If you’re new to real estate, the good news is starting small is the order of the day. Take no more than 30% of your budget for your first deal, and expect to break even at best. Ask any realtor. Not many will say their first deal was the best they’ve ever had. You will however learn a lot from the experience so when you make the second deal there’ll be plenty of areas in which to do better. Target small dingy stores, apartments of the recently departed, and the retirement-home bound.
The only deals that will yield a decent profit are the ones people don’t know about. Stay away from public listings and anything advertised. If there was a profit to be made from them, someone with years of experience and lower costs would have done it already. You have to go out there and create opportunities. Go to those dingy shops and stinky apartments and give them a good reason to sell. Be honest and compelling. For example. Connect a struggling small business owner with a web shop developer that provides social media marketing. The business owner sells his shop to you, converts his garage into a warehouse, and sells his stock online working from home. Everybody wins.
Learning Increases Earnings
Don’t waste your time getting a diploma or taking some expensive eight-month course. The best way to get good at anything is to just do it. There are plenty of inexpensive eBooks, hours of informative YouTube videos, and forums where you can discuss topics and network with people taking the same journey who are slightly ahead on the road. You’ll get to know the market needs best by talking with other realtors. Who wants an apartment in the city, who wants a small house in the suburbs, who prefers a large single level house within an hour of the city center.
The profit is in the purchase, not the sale. You’re selling price has to be at market value or slightly below, unless the property has a uniqueness that sets it apart. When you first look at a property, imagine the finished product. Make a rough guess-timation of how much the renovations will cost (that will get easier with experience). If after a three month remodeling you can sell a property for $100,000, and the renovation will cost $30,000, an offer of $60,000 means you make $3000 per month between buying and selling. Any price bargaining below 60K comes out of YOUR pocket.
So there you have it!
Like any business, there are numerous tricks of the trade that you will pick up in the first two years. Good business people never stop learning, and as their knowledge and experience grows, so does their profits. Many millionaires created their wealth from real estate by consistently growing their company from a one man band to an orchestra. Believe you can do it, learn every day, don’t take days off, and you will succeed.