Are you keen to set up in business as an owner and manager of real estate? There’s a widespread perception that everybody who succeeds in this field started out with a lot of cash, but in fact, that’s not the case. If you’re living on or close to an average income and you’re able to put some money aside, using it wisely can enable you to build up a property portfolio from scratch. This article will help you understand how.
Find your niche
As in many types of business, the key to success is finding an area you instinctively connect with and then learning everything you can about it. Few real estate moguls take on properties of many different types and those who do have usually accumulated many years’ experience before reaching that point.
Consider whether you want to focus on commercial or residential property, a particular geographical area, or a specific renter demographic. It can also be a good idea to limit yourself to properties built using similar materials or construction techniques, especially if you expect to be doing a lot of renovation work.
Use what you have
If you don’t have an inheritance, a lottery win, or similar to invest, the trick to building up a real estate portfolio is to leverage the property you already have to acquire more. Naturally, some risks are involved in this, so you may not wish to do it with the place where you live, but once you have acquired one rental property and you’re getting a steady rental income from it, you can remortgage it.
You can then use the rent to pay the mortgage and invest the cash you get in another property. You’ll need to be careful and make sure you can cope if one of your properties is empty for a while. Provided that you don’t overreach yourself, you can keep on growing your stock of properties, and thereby your income, in this way.
Don’t expect to get rich quick
Although some people do very well out of real estate, it takes some time to get a portfolio up and running. You will usually need to own at least three properties before you can take enough money out of the business to pay yourself a decent wage. It’s likely that for the first year or two, you won’t get paid for your work at all – and there will be real work to do. That is the case with many small businesses however, and if you’re determined, you won’t let it stop you.
Watch and learn
One of the great things about moving into real estate is that it’s more open than other business types. Public access to property records means there’s little secrecy about who owns what, at least if you’re prepared to do the legwork to trace company ownership.
This has shaped a culture in which successful individuals are often happy to discuss their methods. You can also look at their public profiles and learn from them. New York’s Will Obeid made his fortune in high-end hospitality and real estate, illustrating how an understanding of a particular demographic can inform work in more than one sector.
Don’t cut corners
When you’re anxious to increase your profits, it can be tempting to try and manage renovations and decoration on the cheap. That is almost always a false economy. It can lower the amount that you’re able to attract in rental income in the immediate term. In the long term, it can lead to material deterioration, which is much more expensive to fix than it would be if caught early on. If you’re patient and build up a portfolio of several properties, you’ll be able to make savings anyway by taking advantage of economies of scale.
Build up your network
Just as in other areas of business, success in real estate depends to some extent on networking. In this case, the vital area to focus on is supply. Establishing good relationships with suppliers early on can make your business much more efficient. Personal references are always more reliable than merely searching the web, so ask the people who impress you to recommend others.
The same applies to tradespeople. Unless you’re a fully qualified electrician, then you’ll need at least some help fixing up and checking properties. If you plan to do some of the work yourself, take every opportunity to get training and improve your skills – and use courses as a further opportunity to get to know others connected to the business.
Ultimately, real estate is like any other business area – success will only come with time and hard work. You’ll need to be patient, diligent, and focused on quality. In time, however, it can pay off and give you the chance to pursue your passion.