The secret to growing your finances and reaching your goals lies in the diversification of your investments. Simply put, don’t put all your eggs in a single basket, so when one basket falls, you have multiple baskets to rely on to keep those eggs coming.
One such basket is real estate, and that’s what we are going to talk about in this article. We are going to split it into two parts: the first part will be all about how to start investing in a property as an existing small business owner; while the second one is how to treat it as a real, separate business and be a success. We have a lot of ground to cover so let’s get started!
Investing in Real Estate as a Business Owner
First, allow us to answer a question that people ask us frequently: Can business owners invest in real estate? Yes, absolutely. However, we recommend waiting for at least two years for your first business venture to function. This will help you in getting your business loan approved if ever you wish to get one to fund your property investment.
Another crucial tip that we want to share with you is for you to get a good mortgage broker. Having one will not only save you precious time and resources, but you’ll also be able to get the best deals out there that, in the end, will lead to a faster ROI.
The question now is why should you choose real estate to invest in? There are four logical reasons:
1. For Fast Profit
Even though this is not ideal and this method doesn’t really ensure that you will be able to convert your investment into cash as fast as you expect, real estate sometimes offers the chance for immediate profit. Do you have the eye and patience to find undervalued properties? Then you can definitely acquire them for immediate reselling. Aside from that, if you wait long enough, your property’s value can even appreciate significantly over time, allowing you to earn exponentially.
2. For Additional Passive Income
Another reason to get a property is to rent it out and use it to earn steady, monthly passive income. That is, for as long as you have tenants.
3. For Personal Use
Finally, wouldn’t it be great to have a property to go to whenever you want to take a break from your hectic life? There’s no need to pay for a room anymore. You can simply make the space available for home sharing when you’re not using it, in order to get the earnings flowing.
Learn more about this strategy: Are Vacation Rentals a Good Investment for Beginners?
So we’ve already covered the who and why, now let’s talk about the how. Here are some quick tips to help you get started in the right direction:
- Have a plan: Property investment is just like any other business. You need to have a plan or else you’re planning to fail. Having a plan will also help you manage your cash flow.
- Assemble a good team: We have mentioned above that you need a good mortgage broker, but aside from your broker, you’ll also need a real estate agent who can understand your business goals, as well as a reliable repair team for prepping your investment property either for resale or rent.
- Know what you’re getting into: There are a lot of courses, short classes, and even books that you can study to learn the ropes in property investment. The cyclical nature of the real estate industry can still confuse even the most experienced in the industry so be sure to do your homework to minimize investment mistakes as much as possible.
Don’t worry, in time you will develop an instinct for good and bad investments. For now, let’s move on to the next topic that we want to discuss in this article and that’s how to treat real estate as a business.
Being a small business owner can sometimes be a struggle. You need to be wise with your business and investment decisions because one wrong move can cause a significant setback. Fortunately, there is already a huge selection of small business financing options to assist us financially, especially when rare business opportunities pop out of nowhere.
Treating Real Estate as a Business and Tips on How to Succeed!
Have you heard of the saying that employees don’t get rich? You need to become a business owner in order to achieve the affluence you’re aiming for. Unfortunately, there’s only a small percent of small business owners who do attain financial freedom. Why’s that?
That’s because they don’t view it as a business. They follow the financial flowchart of employees who earn money, pay taxes, and then spend what’s left. That flowchart is slightly different for business owners who should earn money, spend it first, and only after that pay their taxes. In this way, you can save significantly on your expenses as long as they meet certain parameters (i.e. you spend them on business expenses).
Another factor that you should consider is who does all the work? Just think about it. All those big companies have their employees work for them. How about you? In this line of business, your portfolio of investment properties should be the one doing all the work.
And when we say portfolio, that’s because you shouldn’t just stop your investment on a single property. As a business, it should continue to grow with each piece you acquire, develop, and add to your roster.
In order to help you succeed, here are a few more tips to keep in mind:
Choose the Right Location
Even the best property can fail when it’s not in the right location. If you’ve followed our advice a while ago to make a business plan, then you should have also determined your business goal by now. What type of properties do you want to work on? Are they commercial, residential, for leasing? Whatever it is, make sure that the location of the property matches your goals as well.
For instance, if your target market is affluent young professionals, then the location should be near a budding business district within a safe high-end neighborhood.
Buy Investment-Grade Property
The next thing that you should consider when buying a property is if it’s investment-grade as well. This means that the property is such a worthwhile buy that it will continue to appreciate in value in time. Not only will you be able to sell the property easier but you’ll also be able to help your clients earn themselves.
Finally, Be Thorough During Property Inspections
The real estate industry is also, unfortunately, one of the most deceiving. In our years of experience, we’ve found properties with mold infestation concealed within freshly painted walls, spray-painted hedges to make the property look more appealing than it actually is…in fact we’ve even been to as many properties than we can count with noise and smell masks (be wary of properties where every room has a candle or incense burning or loud music playing!).
Here’s a tip: Visit the property under different circumstances: early in the morning, late in the evening, while raining, or while it’s smoldering hot. Doing so will give you more insight into how much a property is really worth.
In the end, everyone can start investing in real estate. But doing so as a small business owner can make this challenging endeavor a lot easier. Just prepare a solid business plan and treat it as you would any other business.
By keeping the tips we have shared with you in this article in mind, we’re sure that you will attain success in property investment. Good luck!
This article has been contributed by Mike Abelson.