There will always be demand for both commercial and residential real estate, although the pace of demand growth fluctuates from time to time. The real estate market is highly fragmented and location-centric, where each property’s price varies based on various factors.
Investing in the right real estate property can give handsome, consistent, and inflation-beating returns. However, investing in real estate requires a fair share of guidance and knowledge, as each property has its merits and demerits.
Many who want to invest in real estate contact brokers who sell them properties they feel would give good returns. If the property fails to attract tenants or isn’t getting sold even at a loss, the investment makes no sense. Here is where real estate consulting services could help channel investor’s money towards the right property to help them gain handsome returns.
This is a great opportunity in the market where guidance is extremely important. Having your own real estate consulting firm can reap rich dividends both for you and your clients. To reach the pinnacle of success, you have to start somewhere, right?
Steps to Start a Real Estate Investment Company
Know Your Market and Rules and Regulations Well
Starting a real estate firm does not require you to have a fancy degree or to attend expensive seminars. To start with, you have to know the basics of the industry and its rules and regulations by studying real estate books, podcasts, and blogs. Before you move ahead, you should know about the various tax implications, real estate investment strategies, the power of leverage, the entire process of buying a property, regulatory requirements, and the meaning and use of all real estate terms.
Establish a Business Structure
Are you working solo or in partnership with someone? Usually, real estate entrepreneurs register their firms as a sole proprietorship, a C-corp, a S-corp, or a limited liability company. Some realtors work independently without any legal framework. However, there is always the risk of liabilities in real estate deals, thus you must have a legal entity. This can be done via incorporation. This helps reduce risks and protects your personal assets from being attached.
Write and Follow A Business Plan
Once you are done with the business structure and incorporation, you then need to prepare a foolproof business plan that has to be religiously followed. This should contain in detail the way each process should be followed, how to negotiate various potential setbacks, and how to close the sale. When all of this is documented well, banks and mortgage lenders would feel comfortable lending to you.
Your business plan should include the company overview, short-term and long-term goals, investment strategy, and financial plans. For instance, if you are planning to invest in commercial properties, you need to specify which types of properties you aim to invest in, how much you intend to invest, how you plan to finance the investment, how you would get leads, and so on. You should review your business plans periodically as your portfolio grows from time to time,
Get Investors On-board
Financing your real estate investment company is perhaps the biggest challenge you will face when starting up. This is because real estate investments require a lot of capital financing that is not easily available. The various financing options available to you are-
- Owner financing
- Hard money loans
- Private money loans
- Mortgage loans
- Real Estate investment partnerships and so on.
Build a Real Estate Team
You may think working a one-man-show would help you get all the profits. This may seem lucrative but is not possible in most cases. Investing in real estate requires you to have a host of professionals- accountants, real estate lawyers, appraisers, property managers, and so on. It is not humanly possible to do everything yourself. Once you have secured financing and have set up your firm, you will need to recruit professionals that will help you with statutory compliance, accounting, and other professional requirements.
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Search for Properties That Suit Your Investment Theme
Once you have everything in place, the next step would be to find properties worth investing in. For this, you have to search the entire real estate market in your area that suits your investment theme. For example, if you are investing in commercial real estate for office space, you have to identify a property in a location that isn’t too far from the city center, and that has other amenities in the vicinity.
Real estate investments can be very rewarding if done well. Once you secure funding and the trust of your investors, you can vet and invest in properties that would give your investors great returns. Your performance will speak for itself. The better returns you get your investors, the more investors will come your way. This, however, would take a long time and investment. You have to work hard and smart to get it done within expected timeframes.