“Affordable housing is the new poster boy of Indian real estate, with demand for affordably-priced homes easily putting all other segments in the shade. The incumbent government has pulled out all stops to make its ‘Housing for All by 2022’ a reality, and has heavily incentivized developers and firsttime buyers of affordable
What are the best ways to succeed massively in real estate?
What are the best ways to succeed in Real Estate? First, build your “Real Estate Dream Team”. Second, decide “Investment Vehicle” if you are going to invest and focus your time in Residential or Commercial Real Estate? Third, decide which “Strategy” you will use. This framework is important and determine if you will be successful!
First, in general to be successful in real estate you need to develop your “Real Estate Dream Team“. You need;
- Real Estate Broker/Agent that is experienced
- Contractor, for general maintenance, rehab, to create value to the property, etc…
- Mortgage Broker, Investor, or Cash to acquire real estate.
- An Accountant, CPA, Bookkeeper, at the end of the day, real estate is an investment. You need to manage your bottomline.
- Software for project management, real estate analytics (such as #ZULLOO), portfolio management (keep track of your real estate holding), and CRM.
This is the foundation of your real estate empire. Without it, you’ll run into issues, headaches, and waste your time.
Second step, pick your “Investment Vehicle”. There are dozens (if not hundreds) of different ways to make money as a real estate investor, and it’s up to you to choose the niche you want to get into. Pick a niche, then narrow down your focus, become an expert, network, network, network, network and network with individuals within that niche, and begin building wealth by taking action and executing a plan of action.
Real Estate Niche(s). The following niches are the most common property types that you are likely to deal with as a real estate investor. There are many subsets, remember you don’t need to know them all just pick one and get started. This list is a macro view to help you get started and understand your options;
– Raw Land, land can be subdivided and sold for profit. This is the most common real estate investing strategy when you have raw land. Another strategy is to buy and hold, hoping that someday the land will become much more valuable due to external developments, urban sprawl, growth of a geographic location, or nearby infrastructure development such as construction of highway or other major development being built nearby.
– Single Family Homes (SFH), the most common investment for most first time investors is SFH. They are relatively easy to acquire (finance), rent, and/or sell. There are literally hundreds of programs and guru’s selling you there services, products, “magic formula’s”, mentoring, and/or coaching. The best strategy to start investing in the Investment Vehicle is to purchase a SFH in your neighborhood/area with he help of an experienced Real Estate Broker/Agent that works with real estate investors.
– Duplex/Triplex/Quads, (Small Multifamily properties 2-4 units). This investment vehicle is easy to finance and purchase. If bought properly they can cashflow quite nicely! There is less competition compared to single family homes. These properties are a solid investment vehicle, you can purchase them live in one unit and rent out the others. Another advantage is financing is relatively easy but taking advantage of “economies of scale”, since ONE loan is required to purchase 2,3, and/or 4 units. This Investment vehicle is a perfect for many beginning to advanced investors.
– Small Apartment Buildings (5-50 Units). This investment vehicle can provide significant cash flow for the investor(s). Small Apartment building are not being priced based on “Comps” (Comparable Sales) but the value is derived from the income they bring in. That being said, this can create big opportunities to add value by increasing rent, decreasing expenses, adding amenities, and managing the investment effectively. It is recommended to have an on-site manager who can manager and perform maintenance in exchange for reduced rent. Acquisition of these properties can be more difficult to finance compared to single family homes or Duplex/Triplex/Quads due to the fact that they are “underwritten” by commercial lending standards instead of residential ones. Once again, work with an experienced Commercial Real Estate Broker/Agent.
– Large Apartment Complex/Apartments. This investment vehicle typically costs many millions of dollars to purchase and manage. Large Apartments complexes often include pools, common areas, work-out rooms, business centers, full time staff in the management office, and have high advertising budgets. Usually these large apartments are owned by “syndicates” which is a group of investors who pool their resources for acquisitions.
– Real Estate Invest Trusts (REIT or REIT’s) A REIT is real estate property that is owned by in a “portfolio” which has many different “Investment Vehicle” or classes of real estate. Imagine it being like a “Mutual Fund” compared to a “Stock”. Acquisition usually involves a large number of investors who pool their funds together to form a “REIT” so they can purchase large real estate investments such as Bulk amounts of single family homes/apartment complex, shopping malls, skyscrapers, warehouses, and mass amount of land in developed areas. As an investor this is a “hands-off” way of investing in Real Estate. Usually you purchase shares in a REIT which often have a relatively high dividend payment.
– Commercial Real Estate “Commercial”. This is the most advanced ways to invest in real estate and is not advised for someone starting out in real estate investing. Commercial investments can dramatically vary in style, purpose, size, and costs. Commercial real estate involves a property that is leased to a business by renting building to local business, supermarkets, megastores, or nationwide brands. Commercial real estate often provide good cash flow and consistent payments. The risk is Commercial real estate requires longer holding periods, vacancies exposure for many months to years (empty building, no payments/cashflow).
– Tax Liens, are simply investors paying the amount a property taxes owed by a property owner that failed to pay them. Homeowners that don’t pay their their taxes (local, state or federal). Tax liens sales are complicated transactions that require in depth research, knowledge and experience. Once you own a Tax Lien the property owner has a defined time to pay the tax liens plus interest if they fail to do so within the window allowed the tax lien owner can foreclose the tax lien and control the property.
– Notes, involves the buying and selling of paper mortgages. When a home is financed with a loan a “note” is created. A note buyer will collect the monthly mortgage payment and how the right to keep the note or sell it in the future to another investor.
Now that you have understand all the various Real Estate niches in real estate investing, pick one! Focus on one and become a pro at that niche!
Third and the final steps in becoming a successful real estate investor is to decide which investment “Strategy” to use. Lets look at several different strategies that investors use to make money within the various niches we covered. These are the most common strategies used to make money with these “investment vehicles”
– Buy & Hold. This is the most common form of investing which involves the purchase of the property and renting it out for the long term. This is one of the purest form of investing in real estate and simplest. The goal is to collect/acquire monthly cash flow and wait for the property to appreciate. Appreciation is the value of the property increase that can be sold for gains in the future. Over time you will pay down the mortgage which will increase your equity in the property. The fundamental and core principle using this strategy is to understand market dynamic and evaluate deals (Market Opportunities and Risk). Simply put, is this a good deal, is the real estate at the peak, is it a “seller/bull”, “buyers/bear”, or “sideways” market. Remember this fundamental principle for ever, “YOU MAKE YOUR MONEY ON THE BUY SIDE!” This means you don’t want to overpay for a property. These mistakes can all be avoided by having the right advisor and insights (Real Estate Broker/Agent and real estate data/analytics software). Lastly understand market dynamics. An investor should learn and identify real estate market cycles and how it impacts your strategy. When the real estate market is at a “low point” (prices are affordable/low and inventory is high) the buy and hold investor will purchase properties. Conversely when the market is “on fire”, “active” “hot” it becomes over-heated where prices are high and inventory is low the buy and hold investor will stop buying it until it settles down. During the slow periods, the investor can “cash-in” and sell or do nothing but continue to hold their properties. Some investors never sell their properties but pay the mortgage off and live on the cash flow. If you can learn how to evaluate and buy good deals, find quality tenants, and manage your properties effectively you will have success.
– Flipping Real Estate. This strategy has become very popular over the past 15 years due to many “guru’s”, “mentor programs” and “tv shows” promoting it. Flipping real estate is simply, buying real estate at a discounted price, improving it (in some way) and then selling it at retail price for financial gain. This model is based upon “Buy Low, Sell High”. The issue is how do you determine what is low and what is high and when do you sell? You can use a experienced Real Estate Broker/Agent who has “hyper local market knowledge”, experience, or some sophisticated real estate analytics that uses many data points/source with artificial intelligence and machine learning. To simply put it, analyze mass real estate market data and understand which market you are in. The most popular type of property to flip is the Single Family Home. Follow this “60% investing framework”; Purchase the property 60% of its current value less any rehab costs. The goal is to rehab it (increase value) and sell it for full retail value or a premium depending on your real estate market. One of the most important variable in flipping real estate is “SPEED”! A house flipper will buy, rehab, and sell the property as quickly as possible to reduce market exposure, avoid high carrying costs (financing charges, property taxes, homeowners association fees, utilities charges, and property insurance), and maximize profitability. This strategy is not a “passive” form of investing by instead an “active/hands one” function. Having a effective “Real Estate Dream Team” is vital to success using this strategy.
– Wholesaling Real Estate. This strategy is the process of finding/sourcing a “great” real estate deals. This usually requires writing a contract to acquire the property and then selling the “deal/contract” to another buyer. A wholesaler never actually owns the real estate property but they have the option to purchase it. Instead of purchasing they find another “real estate investor” and sell the contract or assign the contract for a “assignment fee”. The typical fee is usually $500-$8,000 on average depending on the market and the size of the deal. The wholesaler is the “middleman”. There are many “guru’s”, “programs” and selling “mentorships programs” to teach people how perform this function. This strategy has a low startup cost, however it is not as easy to become a successful wholesaler as it sounds. This strategy requires time and contract knowledge.
Now that you have a clearer understanding of how to create your “Real Estate Dream Team”, pick the right “Investment Vehicle” and use the appropriate Real Estate “Strategy” that you can use to build wealth in Real Estate. This is simply the beginning of your journey, learning how to invest in Real Estate can take time and practice. Work with your “Real Estate Dream Team” and take one step at a time and you’ll be on your way to real estate success.
About the Author, Jon Zifcak lives and breaths Technology and Real Estate! Jon has a Master of Business Administration (MBA), a Master of Science in Information Management (MSIM), over 17 year of experience as a Real Estate Investor, Developer, Real Estate & Technology Consultant, licensed Real Estate Broker with various real estate designation (ABR, Accredited Buyer’s Representative, CNS, Certified Negotiation Specialist, e-PRO, National Association of REALTORS® (NAR) developed the e-PRO® certification program to teach members how to effectively use real estate technology, GRI, Graduate, REALTOR® Institute, SFR, Short Sale and Foreclosure Resource), Technologist developing real estate “Model(s)”, “Valuation Platforms” to Identify Real Estate Market Opportunities, Risk and Market Dynamics”, CEO of ZULLOO Inc. ZULLOO, empowers the real estate community to make residential real estate decisions by providing actionable data-driven insights to understand current and predict real estate markets. ZULLOO’s proprietary, cloud-based real estate technology platform incorporates sophisticated modern technology by incorporating Artificial Intelligence (AI), data science, and advanced Machine Learning (ML) to uncover city and neighborhood intel. What if we could understand where residential real estate prices are heading, what actions would you take?