Real Estate has long been considered a profitable venue. There are several ways to make money in the Real Estate arena. The most common is as an agent where you sell property owned by someone else for a commission. Generally, as a real estate sales agent you work for a broker and have to split your commissions with not only your own broker but the listing agent and his broker as well.
If you want to be your own boss and have your own business you can either buy houses for your own portfolio and hold them for the long term while the tenant pays off your mortgage or you can buy undervalued houses which will be later sold for a higher price. Most of the time, improvements and renovations are done on the properties for sale so it could fetch a better price in the market. This is often referred to as “flipping”.
There are a lot of myths around about the real estate business, here are some of them:
First Myth: Real Estate Investment is only for individuals who have a lot of cash
Money is necessary for any business venture. But it is not true that only individuals who are rich or well-off can proceed with the buying and selling of real estate properties. Real estate is commonly purchased with a mortgage thus leveraging your investment. If a 20% down-payment is necessary it is possible to take in a partner to put up the 20%. Often this money is in the form of a loan rather than equity ownership thus the risk is borne by the owner while the person putting up the money gets a guaranteed rate of return often between 10% and 15% per year. Other alternatives are some sort of profit sharing arrangement which should be mutually agreed upon by the co-owners and this usually depends on the amount of their investment but one partner can put up the money while another puts up time and effort. The co-owners need to agree on whether to invest in property for long term rental or for a short term sale before committing to the partnership. Individuals
Second Myth: Real Estate Investment is complicated
Newbie property investors have to learn the basics of real estate investment but it is not that complicated. The key is estimating income and expenses on rented and sold properties. The key “buying right” if you get a good enough deal with a margin for error built in you will be able to turn a profit. Of course, it often takes looking at hundreds of houses in order to find the one perfect deal that will allow you to guarantee a profit.
Third Myth: Real Estate Investment is time-consuming.
Of course all business ventures require time. There is no such thing as sitting back and relaxing while waiting for the money to earn itself. The most successful real estate investors know how to properly manage their time. Setting of goals and developing systems to find houses, evaluate the potential return, line up money partners and close the deals should also form part of the time devoted to real estate investment.
Fourth Myth: Real Estate Investment is very risky
All financial investments have risks. The only difference is that some have higher risks while some have lower levels. Real estate investment could be risky if an individual makes hasty and unplanned actions. This can be reduced by staying on top of what is happening in your local real estate market and only buying properties that meet your strict profitability requirements. Legendary investor Warren Buffett says, “Risk comes from not knowing what you’re doing.” So before you jump into any type of investment whether it is stocks or real estate be sure you have done your homework and know exactly what you are doing. He also said, “Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good results.”
See Also:
- The Wealthy Buy Assets, the Poor Buy Liabilities, and the Middle Class Buy Liabilities Believing They Are Assets
- 2 Types of Mortgage Insurance
- Choosing The Best Bank
Real Estate Resources:
- The Millionaire Real Estate Agent: It’s Not About the Money…It’s About Being the Best You Can Be!
- Buy It, Rent It, Profit!: Make Money as a Landlord in ANY Real Estate Market
- What Every Real Estate Investor Needs to Know About Cash Flow… And 36 Other Key Financial Measures
- Sell with Soul: Creating an Extraordinary Career in Real Estate without Losing Your Friends, Your Principles or Your Self-Respect
