START YOUR REAL ESTATE BUSINESS TODAY
Both novice and seasoned entrepreneurs alike are excited by the potential of a real estate investment. These assets are tangible, less vulnerable to volatile market turns, and are great savings vehicles for retirement. A real estate business is also a great way to earn a passive income that puts more money in your pocket each month—but it’s not without risk. Foreclosure, eviction litigation, and property damage scratch only the tip of the iceberg of problems faced by landlords and property owners. If you’re interested in starting a real estate business, here’s how to do so while safeguarding yourself from risk along the way.
Find the Capital Before you can purchase a property, you’re going to need funding. Few investors have the cash on hand to purchase their investment outright and instead turn to alternative financing methods. Because traditional mortgages typically offer unstable interest rates and terms that span decades long, alternative lending options are often preferable. From private loans on the East coast to hard money lenders in Southern California, direct financing is attractive thanks to quick dispersal and repayment period. No matter where you decide to find the capital for your real estate business, be sure to secure your funds prior to property hunting.
Locate a Great Deal It may take some time to begin investing in real estate as you scour the market to find the best deal possible. Don’t rush this critical step—the property you settle on can determine whether your business sinks or floats. Spend an ample amount of time researching neighborhoods, school districts and employment rates to find the best place to invest; these metrics geared toward the future are better indicators of a solid investment and can help you discern temporary trends. If you’re looking at a property below market value, make sure there are no major structural problems such as water damage or foundation issues or you risk buying in for much more than you anticipated.
Prepare Your Property Whether you present your property in turn-key condition or as a bare bone structure, there are a few mandatory steps you need to take in preparation of renters. Make sure the lights turn on and stove heats up by creating an account with your local utility company, and take care of all necessary security measures including door locks and smoke detectors. If your property had a previous owner, consider changing the carpeting and applying a fresh coat of paint. Extra curb appeal never hurts, so if it’s within your budget, clean up the landscaping and replace the hardware features to make the home appear brand new.
Attract Applicants Curb appeal alone won’t be enough to attract a sizeable pool of tenant applicants, so increase your property’s presence by posting your rental online. Free classifieds such as Craigslist can generate many leads, but listing your property on a professional site such as Apartments.com might attract more serious renters who are willing to pay in order to find the best units. You may want to offer incentives that make your property stand above your competition down the street. Perks such as free utilities, a pet policy, on-site washer and dryer units, or first free month of rent can tip applicants in your favor as they shop around for rentals—especially if the property is priced fairly and in great condition.
Once you draw up a lease and get a great tenant in the door, you can sit back and relax. Set automated reminders for scheduled inspections to protect your safety liability. To save time at the bank every month, set up an online payment system which your tenant can use to easily submit rent straight into your bank account; it’s a win-win situation you’ll both appreciate.
Remember not to get too complacent, however. As a landlord, it’s your responsibility to maintain the property, which includes your tenant’s repair requests—no matter how large or mundane. You can set office hours during which you can be reached, but you’ll always need to make yourself available during times of emergency. If being woken up at 2:00 AM to fix a flooded pipe doesn’t sound like your cup of tea, hire a property manager who can attend to these tasks for you.
Whether your goal is to save for retirement or build income each month, following these steps can help you start a real estate business and increase your net worth. So what are you waiting for? Start your search for financing today!