Real Estate Investing for Entrepreneurs

The world of real estate is a means of investment opportunity for successful entrepreneurs. The risk versus reward aspect relies on knowing which properties are a smart buy, and which will turn into a train wreck. How do the best real estate geniuses know when to buy and when to sell?

Long term

Don’t invest in real estate thinking you will get rich quick, it just won’t happen. Yes, there have been booming moments in history when that did happen, but today’s market isn’t anywhere near that level of activity. In the 90’s buying a property was easy, making renovations, and flipping it for a profit could be done relatively quickly. After the bubble burst, the real estate market has been one of the slowest sectors of the economy to rebound. If you’re thinking about investing in real estate, do your homework and move slowly.

Learn about past successful local investments

Most entrepreneurs find their real estate success by purchasing a property and adding significant value to it. The question is what improvements add the most value? Which are a waste of time that won’t get dollars back for your time and effort?

Look at the local case studies in your area to understand the valuation of your city. For example, if you live in a big city like Portland, you could add value to your property by adding bike lockers and a fitness area in a mixed use building. It comes down to knowing what the culture of your area is like, and what people want to see in their homes.

Knowing when to buy and when to wait for the Unicorn

When investing in real estate it is tempting to buy the first thing you see, but you shouldn’t.  You will want to make a list of “must haves” for the property you want, and wait a while until you find it. Make sure you know what your highest priorities are, what is absolutely necessary, and what is nice to have. Finding that unicorn can be worth the wait, but if you buy the first thing you see and stumble across the unicorn while all your money is tied up, you will want to kick yourself.

Location you cannot change

If you want to understand the area you want to buy in, go look for the worst building on the best street. When you can finally buy that building, you increase you odds of building equity significantly because it can’t possibly get any worse under your watch.

If you choose to buy the best building on the block, you will find it difficult to add value as it already has it.

Know the tax implications

 Just like running a business, you need to know how the financials work. Knowing what deductions you can make, depreciation, mortgage interest, improvements, and operation costs will make you get more bang for your buck. Keep track of it all so when it comes time to sell you have a firm picture of what you want out of your building.

If you have done your own taxes in the past, you will want to educate yourself on the ins and outs of the new sections of tax regulations regarding real estate and business, or find an accountant who knows the subject.

Have a plan

The moment you know you want a building, get your plan ready on how to turn it into money. Know what improvements will increase the value, and whether you want to allow tenants in it, or live in it yourself. Just know what would be holding it back from moving forward. If you are unsure where to begin with your real estate investing, talk to the local Chamber of Commerce and look for a mentor in your area.

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