Beginners in the real estate industry are usually not sure of their options when it comes to investing in real estate market. They have doubts, apprehension or some level of uncertainty as to how things will turn out.
This is not new, neither is it strange. It happens to anyone starting out for the first time in any industry talk less of a industry such as real estate which requires a lump sum investment.
This beginners guide to investing in real estate is designed to help people thinking of investing in real estate to learn the ropes, understand the terminologies and investment strategies which can yield higher profitability. It will also help build experts in real estate investment.
The simple reason is that, real estate investment is a concrete investment. Although the property market may fluctuate, it always bounces back. It is an investment business which can be passed from generation to generation.
Capital Check
This can be as simple as listing all your assets, including incomes and work out your expenses. This will give you an idea of how much cash you have available to invest. In most cases you may have the cash ready. However if you don’t, please do not immediately assume that you can’t afford to invest. As long as you have a stable and reasonably good paying job with solid employment history, you shouldn’t have a problem getting a loan or a mortgage but first seek advice from your bank or mortgage broker.
Articulate your goals
Property investors generally invest in property to secure their financial future or to be free to do what they want, when they want it. In order to achieve your goals, you must first articulate what your goals are. You need to set a deadline as to when you want to achieve these. For example, if want to recreate or replace your income or maybe retire on your investments within 10 years, you can start by creating a 10-year plan, broken down further to 5-yearly, yearly, bi-annual all the way down to weekly timeline. This way you won’t get overwhelmed by the enormity of the task.
Understand your attitude to risk
Doing this will dictate your strategy. Understanding of your own attitude to risk will help you create a strategy that reflects this.
Best Buddy Budgeting!!!
Budgeting is vital. Budgeting is the only way to ensure you’re able to balance your income and expenses. It allows you to see where you’ve been spending your money and helps you to plan for bigger expenses down the line. Make sure you have a budget in place before you start looking for a property.
Draw up your purchase plan
What does an ideal purchase plan look like?
It should facilitate your goals of growing your portfolio to a point where it’s producing the growth or income you’re aiming for. It should also serve as a structure for you to stay in the game.
Here’s an example of a purchase plan you can follow:
- Define the market you want your property to cater to e.g. Students, Single professionals, Families, short lets, High end market
- Do your research on location to suit your consumer
- Cull your list
- Get appraisal
- Do your due diligence
- Make and offer and negotiate
Be informed
Information is power. Being informed means being wary of all the quick and easy methods around you. If you are being guaranteed returns and overnight riches, the best advice is to walk away or better still…..RUN!
No one can make guarantees. Understanding your tolerance for risk will help you shape how much you’re willing to take on over a short or long term.
Stay focused
Make sure you stay focused. Investing in property is a business decision, not an emotional reaction.
- Be clear about what you want to achieve
- Set a date as to when you want to achieve this goal
- Identify milestones you need to do to get to your goals
It is easy to get overwhelmed when starting something new and massive as property investing. However, do don’t give up. Be encouraged. With how fast the real estate market is moving imagine the value of your property in 10 years, if you buy the right properties this year, you could be sitting back, feeling happy, secure and even proud that the properties you bought 10 years ago have that more than doubled in value.