Making your first steps in the property industry can be a terrifying notion. First of all, while it is an investment in a reliable asset, the truth is that, other than being a homeowner, you might lack any kind of knowledge about real estate property ownership, to begin with. For instance, there are many different ways in which you can invest in the property market, each of which will determine the type of income that you’ll generate. Here are the essentials that you have to focus on in order to generate some wealth this way.
Becoming a landlord
For instance, you could become a landlord, thus gathering rent from your tenants. This is great, seeing as how it gives a boost to your passive income, as well as a chance to list many expenses related to owning a rental property is tax-deductible. The problem, however, lies in the fact that rental property management is not an easy task. Second, being a landlord can be a lot of trouble for those who don’t deem themselves as a great judge of character. Keep in mind that finding bad tenants might endanger your property, which is something that you want to avoid at all costs.
One more downside to being a tenant lies in the problem of vacancy. Unlike with a lot of different investments, just sitting on a piece of property isn’t an ideal status. Even if no one lives there, you still get to pay property taxes and the utilities for the place (at least a small amount). This means that every month without a tenant actually costs you money. This is why you need to make sure that the place is in the desired location and that the fit-out of the place, as well as the rent price, are competitive.
Flipping the property
The next idea that a lot of people have is one of fixing and flipping the property. The idea is that you get a property while it’s at its low price and invest in it to increase its resale value. Wait for a bit until the value of the real estate in the neighborhood rises and sell it for a profit. Provided that you list the place as your permanent place of residence for at least two of the previous five years, you might become eligible for capital gain tax benefit. All in all, it’s just one of the options you have available.
The next thing you need to understand is the importance of networking in this industry. You just can’t do it all alone. First, you need a buyer’s agent in order to negotiate in your stead and consult you on crucial matters regarding the investment. Another thing you should think of is the matter of raising the necessary capital. This is a major investment and you simply won’t have enough money just lying around, which is why you need specialized real estate financial advisors like Think Money on your side. Then, there are so many inspectors (general contractors, plumbers, electricians, pest control specialists, etc.) that you need to consult. In order to make it in the industry, you need to start developing your network of contacts.
One of the biggest misconceptions that the majority of people in the real estate industry have is the idea that, in order to invest, you need to do it all on your own. Nothing is further away from the truth. Real estate investment groups are ideal for those who want to own rental real estate without the hassle of actually running it. The biggest benefit lies in the fact that you get a hands-off approach to this situation, while still getting your income. The downside, however, lies in the fact that you don’t have as much control.
Set your expectations
Whether or not you will get disappointed depends on one thing alone – what are you expecting. You see, by setting your expectations realistically, you will already set yourself on a path towards success. First of all, you need to know what kind of profit you can expect. For instance, a rental property should yield about 1 percent of its total value every month, while a commercial property should yield about 4-5 percent on an annual basis. As for fixing and flipping, there’s only so much you can earn.
Keep in mind that these five tips alone are merely a tip of the iceberg of all that you have to learn about this field. Still, if there’s such a thing as a starting point, this would definitely be it. Take your time, do your research and ensure that you have a great start in this field.