Tag Archives: real estate investing

Characteristics of a Valid Real Estate Contract

Usually, transactions that involve buying and selling real estate properties are always expressed in writing. The most vital document in/part of any transaction is the sales contract which, in the real estate field, is also known as the purchase agreement. Although contracts can be oral instead of written, it is advisable to avoid going into oral contracts.

After investing time and finding a property that is in line with your investment dreams, you need to prepare a real estate contract that should have at least a minimum number of characteristics, features, or elements to make it valid enough for presentation to the seller (of the property).

A valid real estate contract is a written agreement between two or more individuals, entities, or corporations; it is legally binding between them in regard to an exchange of property and money or services of any kind.

Any valid real estate contract is no joke: it contains a legally enforceable set of assurances that must be executed because it (the contract) is anchored on the basics of contract law.

We’ve now known what a valid real estate contract is, but what makes a real estate contract valid? A legally binding real estate contract on any activity is valid because it has all the most important and necessary characteristics, features, or elements that empower it and make it legally enforceable on a certain activity (or activities).

The following are nine main characteristics you have to be familiar with and ensure that your valid, enforceable, or legally binding real estate contract possesses them:

1. It (valid real estate contract) consists of individuals or entities that are legally competent

Each individual who is involved in a real estate transaction must be legally competent or have some legal capacity: in most countries and states, the legal capacity is defined as being at least the legal age (usually, 18 years) and mentally matured enough to understand the consequences of taking actions.

Some of the people who are mentally ill and criminals may not be legally competent or have the required legal capacity to engage in a contract. It may even be wise to avoid dealing with people, especially older persons if they appear to have difficulty in communicating or understanding terms or things that a contract has to be founded on.

In some cases, it is important to inquire (from the person you are dealing with) whether they have a representative or someone who can act legally on their behalf.

2. It consists of an offer

The individual or entity who is interested in a property has to make an offer in writing or through written communication to the current owner or seller of the property. The offer has to clearly express the buyer’s interest and willingness to purchase the property according to specific terms.

Nearly all offers have an expiry date or time. Except an expiry date or time is included, the seller may accept an offer at any time before it is revoked or canceled officially by the interested individual (or potential buyer). On the other hand, the seller is at liberty to continue considering the offer or continue to wait or look for a better offer.

3. It consists of information that proves acceptance (of the offer)

Not all offers are accepted. If an offer is accepted, it is expressed as a positive written response that is in agreement with the exact terms stated by the buyer/potential buyer. In cases where the seller proposes changes to the terms or conditions, he may make a counteroffer and notify the buyer.

4. It may consist of a counteroffer

A counteroffer can also be referred to as a “legally new offer”; it only comes into existence when the original offer is rejected or becomes void. Sometimes, counteroffers can go back and forth between seller and buyer until both (seller and buyer) come to an agreement. At this point, the final accepted offer becomes the binding agreement between the individuals or entities.

5. It consists of an exchange

The exchange part of a real estate deal is very important to most individuals or entities; the exchange aspect of a deal involved the substitution or transfer of property and money or services of any kind, between seller and buyer.

Usually, buyers offer money, services, or something of great value to sellers who, in return, hand over ownership of property to buyers. A real estate contract would not be enforceable if each individual or entity doesn’t offer at least some form of exchange to the other individual or entity.

6. It consists of information that clearly identifies a property

All property must be clearly and unambiguously identified in order to leave no surface scratched. Usually, a legal description is used for each property. Clear identification is necessary so as to erase any uncertainty about a property that is being exchanged, sold, or transferred from seller to buyer.

7. It has a legal purpose

Most countries support legal acts and ban acts that are regarded as illegal. Your real estate contract must have a legal purpose and should not be used for illegal and immoral purposes that are against public policy. Some properties are used to carry out certain activities that violate the local prohibitions that are against operating businesses; for example, some people operate factories or similar types of businesses in residentially zoned areas that prohibit such actions.

8. Its information is stated in writing: it’s a written contract

A valid real estate contract has to be a written contract because that’s the requirement for all legally binding exchanges in real estate. All the conditions or terms surrounding the sales or purchase agreement must be done in writing, even if the contract contains minor items that don’t seem to be important.

Written contracts help to prevent or erase confusion surrounding the content that is used to describe its components or constituents. It is crucial that all relevant and consequential details be written or clearly specified in writing, and whatever is not for exchange or sale must be clearly written as well. In fact, if anything is not in writing, don’t regard it as part of the contract.

9. It is signed

A valid real estate contract must be signed by the individuals involved and have statements that describe all dates and times which are important and should not be ignored by any involved individual or entity without the written consent of the (individual or entity).

Whenever one individual’s consent is ignored or overlooked by the other individual, then the latter has breached the contract or contract terms. Once a breach of contract has occurred, the other individual or entity may be entitled to sue, claim monetary damages, or use the law to force the seller to agree to the contract terms.

Advice

Ensure that all agreements (for real estate sales) made between you and other individuals or entities are done in writing. Unless they are done in writing, do not regard them as being valid, legally binding, or enforceable real estate contracts. Without being written, they aren’t!

No matter how reasonable or convenient it may seem at the moment, never make an oral agreement of any kind on any real estate property. Most countries and laws require all exchanges in real estate to be in writing and enforceable in a court of law. They must include purchase agreements or sales contracts, and leases, and may include loans secured by mortgages or notes, commission agreements with agents, listing contracts, etc.

A contract can be declared invalid or void if it fails to possess the essential elements of a valid real estate contract. An invalid contract has no legal power and is thus unenforceable in a court of law.

Major Sources of Real Estate Property Valuation Information

Adequate and dependable real estate property and market information is crucial in the practice of professional and ethical real estate property valuation.

On the other hand, inadequate and flaky property market data or info has a high tendency to carry its users astray and produce inaccurate property valuations that can instigate worrying trends.

Incorrect or improper valuations can have a negative impact on investor confidence, property market performance, the economy, and generally derail investments in real properties.

For this reason, the availability of correct and reliable property market information should be taken seriously and consistently used to maintain or improve property valuation practices in:

  • the purchase, sale, and letting of properties
  • real estate insurance and taxation and insurance
  • real estate investment and management
  • real estate inheritance and settlement
  • asset allocation, re-allocation, and sharing, and
  • government privatization and divestiture programs

As an interested individual, investor, or prospective buyer, you may find that the following sources or practitioners have the kind of property market information that can be used to conduct proper property valuation and evaluate the worth of various kinds of properties:

1. Property sellers               

Sellers may have their own property market database, or they may represent property owners, public institutions, estate agents, estate developers, or even their own professional colleagues.

Many sellers actually go the extra mile to conduct their own “informal” research and obtain information concerning recent sales of properties that they are personally aware of in a locality or an area.

Good sellers are knowledgeable enough to evaluate properties and make critical decisions concerning the asking prices for properties. It’s important to point out that because property valuation has many variables, the pricing of income properties might not always be as highly precise or accurate as it could be.

2. Real estate brokers and agents

Brokers and agents can also have their own database. On the other hand, they may represent property owners, public institutions, or their professional colleagues.

Good brokers and agents have access to highly valuable competitive market analysis (CMA) or the “broker price opinion” (BPO) which is more in-depth; both represent estimates of market value for properties that exist in local areas.

Because brokers and agents periodically monitor the listing and sale of corresponding properties, they provide information about CMA and BPO to property owners with the aim of acquiring listings on various properties.

Based on property valuation information, brokers’ and agents’ property valuations can be reasonable or fair; however, it’s important for a buyer to note that valuations can rise higher if an agent or broker is aware that they would personally be given higher compensation if their valuation attracts a higher sales price.

3. Professional property appraisers

Like sellers, brokers, and agents, professional property appraisers can also have their own database, or they may represent property owners, public institutions, or their professional colleagues during property valuations.

In many instances, lenders and property owners hire professional property appraisers or valuation specialists to estimate the value of properties at/around a particular time.

Appraisers are rarely consulted by sellers who may only establish contact when the sale of a property is caused by litigation or probate will, or when the government is either the buyer or seller of a property.

Concluding remarks

Accurate property market information is not always easy to come by. As a result, over the years, countries—especially Western developed ones—have been assembling relevant information, formulating institutions, and creating and improving access to reliable property market information.

Quite a lot has been achieved because of the interest, concern, and care that some practitioners have shown towards property information/data collection and the administration of a property market databank to help provide reliable property market data.

Their unwavering dedication could suggest a need for property valuers or evaluators and estate agents to undergo regular and applicable training which can develop and enhance their valuation knowledge, capabilities, and skills.

Economic Concepts to Consider When Evaluating Real Estate Properties

It’s important to acknowledge and understand certain economic concepts when you are evaluating the present or future potential value of any real estate property or investment.

For various reasons, the demand for and value of different types of real estate properties is either low, medium, or high: a property can be relatively accessible or inaccessible, regardless of its location, the surrounding weather, and the complexity of local, national, or regional government requirements for ownership of properties.

So what leads to the differences or disparities in the values or prices of real estate properties? To be in a good position to answer this question, you have to consider various important economic concepts when evaluating the potential value or price of any property.

The basis for evaluating the value of any piece of real estate is anchored on the following economic concepts:

1. Demand

Demand is an economic concept that is influenced by the need or desire to possess or own a property or properties. People who have sufficient financial means or purchasing power also have the ability to satisfy their needs. Having both the desire and ability to purchase real estate is known as “effective demand”.

2. Scarcity

Scarcity is an economic concept that expresses the level of deficiency or inadequacy of the quantity or number of a specific type of property in comparison with the demand for the same type of property. In other words, scarcity refers to “the relative demand for” versus “the relative supply of” a specific type of property.

For instance, there could be high demand for and low supply of a specific type of property in one region; yet, in another region, there could be low demand for and abundant supply of the same type of property. Therefore, properties are scarce in regions that have high demand and low supply.

3. Substitution

The economic concept known as “substitution” refers to situations whereby investors decide not to pay more money for a property that is similar to another property which has a known price. Generally, properties are unique and limited and the economic concept of substitution only applies when another property can meet the same needs or desires of the investor who is linked to the property.

4. Utility

The economic concept known as utility refers to the ability of a property to be maximally used or utilized for an intended purpose; it can be defined as the ability of property to be put to practical use.

Various factors that influence utility are aesthetics (physical looks or attributes), location, government regulations, environmental limitations, etc. For instance, a location that is very inaccessible or difficult to access won’t be suitable for retail (selling of goods or services) purposes.

5. Transferability

This term/economic concept refers to comparative ease of transferring or exchanging ownership rights and control of a property from one person or party to another.

Transferability makes it possible for people or parties to acquire, own, and control real estate property. Transferability and the value of a property can be affected by constraints or restrictions, conditions, and formal agreements.

6. Conformity

Conformity is an economic concept that can guide against any form of waste created by over-improving a property. The value of a property is optimized if it “at least” conforms to the attributes of its surrounding or location.

On the other hand, the value of a property can be negatively impacted if it doesn’t conform to the attributes of its surrounding or location.

Optimized value or high value is what real estate investors seek when they purchase properties, especially distressed properties which need to be renovated to enhance their utility and appearance to such an extent that they can conform to the attributes of their surroundings or locations.

7. Regression

It’s important to consider regression when investing in properties: the value of a property can be negatively impacted if the attributes of its surrounding is of a substandard value, inferior value, low value, or in a worse or terrible condition.

In other words, it is advisable not to waste your time and money investing in good properties if they are located in deteriorating or bad neighborhoods.

8. Progression

This concept is very important—if not the most important—for people who wish to achieve long-term success. Progression is about constantly moving forward in terms of increasing the value of any property and making high profits which can both be accomplished by investing in and improving poorly maintained or neglected properties that are located in good neighborhoods.

The value of many types of properties can be significantly increased by maintaining, upgrading, and repairing them in order to raise their level to at least that of other properties in the same surrounding or vicinity.

Note

Most (if not all) real estate investors would like to invest in properties that are maximally productive or have the potential to be maximally productive. Maximum productivity is synonymous with the “highest and best use” (HBU) analysis.

The economic concepts of utility and substitution are the drivers of HBU analysis or assessment which is a concept in real estate appraisal that establishes how the highest value for a property is attained.

The highest and best use is always that purpose that would generate the highest value for a property, regardless of how it is currently being used.

The highest and best use of a property might not remain constant over time. In fact, zoning of a property can rule out some potential uses of a property during evaluation—i.e., when it is being evaluated.

At the end of the day, determining the possible, likely, or “fair market” value (the price that a buyer is willing to pay and a seller is willing to accept for a property at a given time) of a property is often baffling because—as they say—“beauty is in the eye of the beholder”!

The Value of Real Estate Cycles: Understanding Buyer’s & Seller’s Markets

As it happens in other fields, it also happens in real estate: some real estate investors don’t monitor real estate market conditions, locally or globally, and end up losing ground where they could have won it.

Some investors make the big mistake of not continuously conducting research that can update them with information about recent economics of the local or global real estate market.

Some investors are only concerned about the money aspect of real estate; as a result, they aren’t even aware that real estate cycles exist and the tides of any real estate market can change when they least expect.

Lack of awareness about any change can lead investors to failure after investing their time and money and making so-called “juicy” or “promising” investments.

The old news (for those who know) and new news (for those who don’t know) is one and the same: the real estate market and criteria that influence people’s decisions are dynamic and do fluctuate. And their value deserves people’s attention.

Therefore, even if you’ve been successful in the past, or you plan to buy and hold real estate, you need to pay attention to/be up-to-date with the real estate cycle or market conditions.

Intelligent real estate investors always find time to monitor their markets to look for signs of real estate cycles which can open opportunities for real estate businesses.

On the other hand, lack of awareness of real estate cycles can stunt or halt the growth of a real estate business.

The fact that real estate markets are cyclical—they have cycles—is one major reason why you need to keep track of real estate market conditions and the timing of buyer’s and seller’s markets.

What is buyer’s market?

In real estate, a buyer’s market situation occurs when property owners aren’t able to sell their properties quickly because supply is higher than demand—i.e., the demand for properties is lesser than the supply.

This condition makes sellers more flexible with their prices and gives buyers an advantage over sellers. It opens great opportunities for investors to seek seller financing.

What is seller’s market?

A seller’s market situation occurs when property owners are able to sell their real estate properties quickly because the demand for them is higher than the supply.

This condition makes it possible for property sellers to receive multiple offers in a short period of time and even sell properties higher than their respective asking prices.

Real estate cycles, influenced by demand and supply

A real estate market may have either more demand, or more supply, or a comparably equal level of both. More demand for properties causes shortage of supply, increases rents, and appreciates the value of properties.

This can expand real estate businesses and lead to building of more properties. It other cases, it can even lead to overbuilding—meaning, high or excess supply of properties—and subsequent decrease in rents and property valuation when the real estate cycle changes—supply becomes higher than demand.

Some property investors believe that regardless of the economic situation or level of demand and supply, they don’t really need information concerning real estate cycles.

They believe they’ll be able to make it and expand their businesses, unhindered, because people will always search for places to buy or rent and live in.

Although this could be partially true, it is important to note that demand and supply fluctuate in different regions of the world, and the economic base of a region greatly impacts its rental rates, occupancy, and even tenant and buyer quality.

So, even if people are always going search for properties to live in, certainly, the same people would hardly ever demand for properties located in regions that are known or becoming known for issues such as fighting, wars, or being blown away by floods and earthquakes.

Various conditions can cause demand to be low or missing and create opportunities for investors to fall or rise, depending on the decisions they take.

Follow the path of knowledgeable and successful property investors who are aware that real estate has cycles and, with good timing, the real estate market can yield great dividends from wise decisions after tracking cycles and acquiring valuable information.

Important Questions You Should Consider Before Investing in Real Estate Properties

Real estate investing has a lot of benefits and anybody can succeed in it if they make up their mind, put in appreciable effort, and do their homework which would consists of some necessary tasks.

However, as is applicable to many other endeavors, an interested individual has to ask themself some important questions and provide reasonable or good answers before making a final decision about getting involved in real estate investing.

This article discusses the following important questions you should ask yourself in order to be in the best position to know whether you have what it takes to succeed if you make real estate investments which involve managing properties:

1. Do you have interest in real estate investing?

The best and most successful real estate investors have interest in real estate investing and are always striving to expand or maintain their businesses. If you don’t have interest in real estate—or anything—it will be difficult to succeed at doing it. Real estate investing, like many other ventures, is not for everybody; you have to be interested and feel comfortable with it so that you can be in a good position to make any progress or achievements.

2. Do you/will you have adequate time for real estate investing?

Acquiring real estate is often time-consuming: it usually takes considerable or even a lot of time to establish any type of real estate investing business; it takes time to find ethical and competent real estate practitioners; also, it takes time to investigate neighborhoods, zones, and properties to assess whether there are any issues that have to be resolved before investing.

From the onset, it’s not always possible to foreknow the amount of time that would be required to seal a deal; if you fail to do your homework properly before purchasing real estate properties, you may end up making mistakes and overpaying or purchasing properties that have issues.

Even if you hire a property manager to assist you in evaluating prospective tenants, managing your properties, solving problems in properties, and collecting the rent, you would need to create some amount of time while paying for the property manager’s services.

If you have many other responsibilities and don’t have enough time, it may be more preferable to look into the aspects of real estate investing that are less time-intensive or time-consuming.

3. Do you have what it takes to handle real estate investing issues or problems?

Issues, problems, or challenges are part of everyday life, and problems may inevitably occur in real estate investing, especially when you want to buy or invest in properties. At all times you have to be prepared beforehand for problems which could arise from anywhere during negotiations, purchases, or investigations that are tied to properties.

If you don’t have enough steel or guts, then you won’t be able to manage properties and the type of tenants who don’t take proper care of the properties that are entrusted to them. If issues or problems cause you to be out of sorts and unfocused, then you might not be able to succeed in real estate investing and may need the services of a property manager.

Financial rewards can come after all the headaches, but you really need to ask yourself whether you would feel comfortable owning and managing properties along with tenants and any unforeseen issues that could arise in the future.

4. Can you/will you be able to handle downturns in the real estate market or activities?

Real estate can be fun when prices and rents are rising, but not a whole lot of fun when real estate market downturns occur! Consider what happened when the prices of real estate properties in the market declined in most communities during the late 2000s.

Although many people experienced losses, other people who had cash and courage or guts, saw the decline as an opportunity and cashed in and reaped good benefits much later. Can you/will you be emotionally and financially balanced when the real estate market experiences rough times?

The truth is that real estate investing can face difficult times, especially when there are downturns or declines in real estate business activities and property prices. Do you/will you have the financial wherewithal to handle any possible downturn? Will you be able to handle your real estate investments when their values fall?

You probably don’t have the gift of clairvoyance to predict how prices may rise or fall, or how properties may appreciate or depreciate; so you need to be prepared to handle your property carefully, especially if property values drop, the real estate market goes haywire, or recessions occur and it becomes more difficult to find and keep quality tenants.

Major Reasons Why Some People Fail at Rental Property Investing

Some people who venture into rental property investing have so much hope to succeed in the future; they even acquire a rental portfolio that is good enough to make them succeed. However, they end up failing at rental property investing after losing most or all of their investments/properties to foreclosure, even to the point of filing for bankruptcy.

In other cases, after years of hard work, some rental property or real estate investors witness how all their investments come crashing down to such an extent that they aren’t able to recover and become active in rental property or real estate investing.

If rental property or real estate investing is a promising venture that has made many people wealthy, why do some people fail at it? What have successful rental property or real estate investors done and avoided in order to succeed at investing?

For a number of reasons, investors usually make mistakes and fail at rental property investing. To avoid wasting time and effort and also avoid experiencing failure after putting in hard work, investors have to pay attention to the following major reasons why some people fail at rental property investing:

1. They don’t have enough education

Anyone who is interested in venturing into any endeavor should have appreciable, sufficient, or—if possible—solid knowledge or education about it, especially before diving deep into it.

Apart from knowing the benefits of real estate as an investment, investors should be educated enough and have sufficient reasons for investing in rental or real estate properties.

Without much consideration, understanding, forethought or planning, some people assume that rental property investing is the right path for them; as a result, they make the grave mistake of jumping into rental property or real estate investing with little or no understanding about what they are doing or what they need to do to succeed.

Worst still, some investors lack enough education about real estate or rental properties, so they make wrong or detrimental decisions; for instance, they repeatedly buy wrong properties in wrong areas and finance them with wrong types of financing.

A lot of investors wrongly assume that they will succeed at rental property investing just because they are renting or leasing properties. Also, a lot of investors wrongly assume that they will succeed at real estate investing just because they are buying and selling properties.

Investors need an appreciable amount of education which should be adequate enough to help them succeed. Thousands, hundreds of thousands, or even millions of dollars don’t have to be spent in order to get adequate education.

Sometimes, getting knowledge and experience from the right person or people could provide enough education. Education can also be acquired by reading books and blog posts, attending offline or online forums, watching or listening to podcasts, and getting access to other low-cost educational resources.

2. They don’t make sufficient analysis

Some investors don’t analyze numbers and read between lines before buying or investing in properties: they make some big mistakes because they invest hastily or carelessly without carrying out sufficient analysis.

Without adequate analysis, it will be difficult for an investor to make an approximate or a precise estimate of the profit that could be generated from an investment. Although it’s not always possible to know future outcomes, it is much easier to predict outcomes or know what to expect if solid analyses are made.

3. They take too much risk

Although risks are inherent in every type of investment, there is always an extent or point at which risks can become too great, unbearable, and detrimental and lead to complete failure.

For example, it might be too risky to buy many properties, too fast, without forethought and adequate education, and also without making sufficient or thorough analysis.

There might be too much risk in deciding to over-leverage properties by getting involved in too many low-down deals that won’t be considered as deals at the end of the day. Also, it might be too risky to consistently refinance properties, pull out all equity, and invest in other properties.

Most failures are tied to risks which become evident reasons for failure when the chips are finally down. Investors should never forget that investing can be risky and any risk associated with investing is a powerful but dangerous tool that has to be used with caution.

Investors can avoid detrimental risks by investing only in properties or deals that can be regarded as 100% safe after analyzing them.

4. They don’t take their investing business seriously

Some investors don’t treat their business with the utmost seriousness that it requires—they don’t treat their business like a business; as a result, they fail at rental property investing because their approach to investing was faulty right from the very beginning. Failure from lack of seriousness shows in the end results they get after investing.

Some investors are not serious or disciplined enough to handle their business: they are late at doing everything; they don’t contact people enough, even when they have enough contacts; they don’t tie together well-known schemes that can help their businesses grow; they don’t have rules for getting good tenants; even when they do, they allow tenants to make late rent payments or deteriorate the condition of rented properties; etc.

Any investor who wants to avoid failing, should take their rental property business seriously by consistently monitoring every aspect of it, hiring the right people to do the right jobs, doing every necessary thing at the right time, and always looking for ways to improve in order to create a long-lasting rental property business.

18 Reasons Why You Should Invest in Real Estate Properties

There are people who invested in real estate properties in the past and made millions of dollars, pounds, or other currencies; in fact, they made so much money that they could literally have stopped working if they wanted to and consistently relaxed on any beautiful beach, or in any part of the world. If you have an opportunity to meet such people today, you would come to realize some obvious reasons why you should invest in real estate properties.

Are you willing to acquire knowledge, create time, commit yourself, and take action by performing major real estate duties in order to achieve big goals when investing in rental properties? Are you willing to take some necessary steps to achieve success in real estate investing? Are you willing to invest your time or money—whether borrowed or not borrowed—to realize your real estate dreams? If your answer to these questions is “yes”, then you can get there and surpass many people who have reached there before.

It’s possible for you to achieve even more than the greatest ones have; however, if you are looking for a fast and easy path to riches, then investing in real estate properties might not be the best path for you. On the other hand, if you are willing to do what is necessary to find success, even if it requires passing through a difficult pathway, then you would appreciate the content of this article which discusses the following 18 reasons why you should invest in real estate properties:

1. Countless people have made a living from real estate properties

It’s much easier to have faith to achieve something if there is evidence that countless people have achieved it before and continue to achieve it today. From the distant past, not-too-distant past, and presently, there is proof that landlords have built and continue to build wealth by owning and renting land and properties.

Because countless people have succeeded before and are succeeding today, you can also take some important steps to achieve success by investing in real estate properties. Andrew Carnegie once said: “Ninety-nine percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests their (sic) money in real estate”.

2. Dealing in real estate properties is a simple and straightforward process

Although an appreciable amount of time and effort would be required to succeed when you invest in real estate properties, all things being equal, the processes and activities involved are simple and straightforward. The schemes or strategies for success won’t be difficult to learn, practice, and master if you’re really interested and dedicated enough. Along your real estate investing journey, every skill you acquire will become second nature if you’re truly interested in investing in real estate properties.

3. Investing in real estate properties requires little or no money for start-up

Because people are always looking for properties to live in, there will always be countless opportunities to invest either your money or time and start making money by getting involved in real estate property deals. Contrary to the belief held by certain people, you don’t need millions to invest in real estate properties.

You can start with no money by working as an agent and getting commissions when you connect clients to properties; in so doing, you can make consistent amounts of cash from each deal. On the other hand, you can invest with your own money, but this depends on the amount of money you have in your pocket.

Even if you don’t have any money, you can take a loan or borrow money from banks, private lenders, etc., and invest in real estate properties. Loans are easier to get if your proposals can convince lenders that you would be able to invest in real estate properties and make money for both yourself and the lender.

4. The real estate property market is reasonably predictable and stable

If you take time and pay close attention to the real estate market and its defining characteristics, you could be able to predict when it would be fair to make investments for long-term gains; also, you would be able to predict quite fairly when it wouldn’t be so necessary to make investments for short-term gains that could make you lose your investments like some investors unfortunately did when the real estate market crashed in 2007.

Although the real estate market crashed in 2007, it was stable enough at the time for investors who had invested for long-term gains; they didn’t lose as much as those who were impatient and tried to be too greedy by focussing on short-term gains. Generally, real estate markets are predictable and stable for those who are attentive and have a long-term perspective.

5. Real estate properties can be managed directly

Because real estate properties can be managed or controlled directly, you can be your own boss and have direct control over the future and outcome of any deals you could be involved in. When you’re in full control, it would be up to you to decide whether or not properties should be in good or better shape and have the best possible outlook before you sell or rent them: you wouldn’t have to depend or wait on anyone else to determine the shape and outlook which would automatically determine the amount of money you could make from properties.

6. Investing in real estate properties makes it possible to create wealth without owning or managing any properties

It’s possible for you to make money by investing in real estate properties without owning and managing any properties; you can do so by getting involved in real estate investment trusts (REITs) and buying and selling publicly-traded REITs on major stock exchanges which usually trade under high volumes. One great advantage of REITs is that they pay 90% of income to investors and generally offer higher dividends than many other stocks.

7. Real estate properties always provide “multiple opportunities” which you could use to maximize value and profit

In comparison with other “non-real estate” businesses and real estate niches and schemes/strategies, if you invest in real estate properties, you would have opportunities to make profits through four major sources: cash flow, appreciation, tax benefits, and loan paydown.

Cash flow is the profit your properties could make after you’ve made initial investments. Appreciation is the extra money your properties could make over time as a result of an increase in their value; property that is $200,000 today could be worth $400,000 in 2 years’ time.

Depending on the country, there are usually tax benefits for real estate investors who provide housing for citizens and enhance stability in an economy. Loan paydown is a process whereby returns from investments are used to “pay loans down” after making profits by obtaining loans and investing in properties.

8. The real estate market is ever-present because people are always looking for real estate properties to buy, sell, or rent

No matter what happens in the world—regardless of how and when things go right or wrong—you will find people who are always looking for real estate properties to live in: the demand for properties will never come to an end because people will continue searching for houses or properties to live in. As a result, the rental property market will always be alive; instead of ceasing, it would only continue to grow over time as the world’s population increases at a steady rate.

9. Real estate properties have the potential to help you acquire leverages that can be used to make returns that are higher than initial investments

Generally, the nature of real estate properties makes it possible for investors to acquire leverages and invest in large properties for an amount of money that is less or lesser than the amount they would need to acquire other types of investments such as stocks. You can use real estate properties to acquire leverages and amplify your gains if you succeed in making returns on investments that are higher than the initial investments.

Leverage is an investment scheme or strategy used in real estate investing to borrow money or capital in order to increase the potential return on investment: it can also be defined as the amount of debt a business uses to manage and finance its asset in order to make profits. Leverages are the proceeds from borrowed capital that has been invested—in this case, in real estate properties—in order to grow a business’ assets or initial investment, and make higher returns.

10. If you don’t amend real estate properties, they still have the potential to attract returns that are higher than initial investments

No matter the method you employ in investing in real estate properties—whether it’s by using your own money, or borrowed money from a bank or private lender—the properties you invest in have the potential to attract returns (ROIs) that are higher than the amount of money invested, even when you don’t make any amendments on the properties in order to make them look more attractive or marketable.

11. If you amend real estate properties, their flexibility provides opportunities to make returns that are much higher than initial investments

Real estate properties are flexible because they are capable of being altered, structurally or functionally; by amending them, you can increase your profits much more than usual. This simply implies that you can make magic happen by rehabilitating or altering the outlook or structure of a property in order to maximize your profits or make better deals that can even attract greater returns.

12. You can focus on one, a few, or various types or classes of real estate properties

If you invest in real estate properties, you won’t be restricted to focus on only one or a few types and classes of properties: because properties are of various types and classes, you have options to focus on a few or many varieties of properties: commercial properties, large apartment properties, small multi-family properties (duplexes, triplexes, and fourplexes or quads), single-family properties, small multifamily properties, large multifamily properties, mobile properties or homes, empty land and occupied land, etc.

Within each type of property, you can still find those that are either small or large, old or new, short or tall, bad (ugly) or good (beautiful), etc.; in fact, the possibilities are endless.

13. Real estate properties are always associated with secret/hidden but legal information which you can use to benefit your investment

In the real estate world, there is always secret, hidden, or “insider” information that you can use to make profit which can benefit your investments because you are in the right place and have access or “connections” at the right time.

If you are aware that the government plans to lease out commercial buildings or large apartment complexes in a new city, you can hop in much earlier and connect with deals—that are tied to the properties—before the information leaks out. If you are aware that an industry is vacating from an area, and you perceive that it would be bad for your business, you can get your business out of that area before the industry leaves and the remaining associated businesses start declining.

14. In many instances, you can purchase real estate properties below their market value

Since negotiations, and sometimes intense arguments, are normal in the real estate world, if you are an intelligent negotiator and know how to win people over, there are many instances you can use to get great deals and buy properties below their approximate or actual market value. You can actually buy properties for thousands of dollars less than their actual worth in the market.

15. Real estate properties provide opportunities for you to make money without always being present

Although real estate investing can time-demanding, you don’t always have to be present before deals go through: because real estate has the potential to help create connections that can be used to make contracts, and outsource deals and landlording processes, in many instances when you don’t have sufficient time on your hands, you can still be involved in deals and make money without being physically present.

16. Investing in real estate properties can enable you to help your economy provide more hedge against inflation

As populations continue to increase and the economies of many countries expand, the demand for real estate properties continues to increase and drive rents higher; this, in turn, attracts higher capital and enhances GDP growth in each country. Therefore, if you are a big and influential investor in your country, you could help provide more hedge against inflation and stabilize the economy by using capital appreciation to minimize some of the inflationary pressure on the economy.

17. Investing in real estate properties can help diversify your portfolio and stabilize your income during rough times

If you’ve invested a lot of money in many other opportunities besides real estate properties, one way you can reduce the risk of losing much or all your total income when unfortunate circumstances arise is by diversifying your portfolio; you can diversify a bit more by investing some of your total income in real estate properties and reduce the risk of losing all or substantial amounts of your total income when investments in other “non-real estate” opportunities fail to yield the financial returns you expect.

18. Investing in real estate properties could eventually inspire and help you afford the house of your dreams

Although you might not be able to afford your dream house at the moment, you can buy or invest in a more affordable house and use real estate investment schemes or strategies to build profit or equity from it; if you do so over a period of time, you could be able to build a net-worth that would provide you with enough money to buy your own dream house.

10 Important Steps for Success in Real Estate Investing

The world of real estate investing can be very intimidating and challenging, especially for people who have either little or no experience, or are just getting started in real estate investing.

Each real estate practitioner or professional has their own level of experience and goals: some people who are at the beginning of their real estate investing career would like to know how to invest in real estate, and others who haven’t started practicing would like to know how to start investing in real estate.

Download PDF: 12 Major Qualities of a Top Real Estate Agent

Although the content of this article might not be all-encompassing, it provides relevant information that can enlighten you on how to get into real estate investing and increase your chances of building your career and wealth, and minimizing losses or failure.

The 10 steps that will be discussed are:

1. Make a firm decision to start real estate investing

2. Get some education in real estate investing

3. Decide the real estate investing niches and schemes to focus on

4. Make your own real estate investing plan

5. Look for real estate properties to invest in

6. Choose the methods you would employ in financing your real estate deals

7. Choose how you would market your real estate investing business

8. Know when to utilize your exit schemes in real estate deals

9. Get adequate insurance for your real estate properties

10. Manage your real estate properties effectively

Now let’s discuss these 10 important steps for success in real estate investing:

1. Make a firm decision to start real estate investing

Apart from real estate, there are many other professions you can concentrate on; but if you are really interested in real estate investing, then you must make a firm decision and be prepared to face any obstacles or challenges that may come across your path in the future.

You have to make up your mind before getting into real estate investing; this is the first step you have to take in order to remain consistently motivated on your journey in real estate investing. One of the most popular reasons people give for investing in real estate is to acquire financial freedom.

Generally, each person who is interested in buying or selling real estate properties has their own personal reasons why they want to start or get into real estate investing. However, it is pertinent to note that any reason—including making money—might not always give you all the satisfaction you need; so you have to weigh every desire and intention and make a firm decision.

2. Get some education in real estate investing

Some people think that the education aspect of real estate investing is not important because they already know the basics; so they think that they know everything. It would be much easier for you to increase your chances of failure if you don’t have either a basic, substantial, or solid understanding of real estate investing principles.

Generally, a solid foundation is key to succeeding in real estate investing, and sustaining your success in the long run. Getting some education in real estate investing is one of the most important steps you should take because it can provide you with detailed information that can help you move forward in your real estate investing career.

So, how can you get some real estate investing education? You can get it by: going to a good school; reading information-rich books; getting and learning from a sound mentor; in addition, since the internet has a lot of valuable information, you can read articles on blogs or sites, and listen to real estate investing podcasts.

Even after consistently learning from many sources, there would always be room for you to keep learning, educating, and improving yourself.

3. Decide the real estate investing niches and schemes to focus on

You might have the impression that you need to know much about every real estate investing niche and scheme (strategy); however, the truth is that you don’t need to: you can concentrate on some niches and schemes before building on your experience and concentrating on more niches and schemes.

At the start of your real estate investing career, you might waste your time and wear yourself out if you try to be a jack of all trades or an expert in all niches and schemes/strategies. It is advisable that you conduct proper research and choose some niches and schemes (strategies) to get the best results and achieve your goals.

There are different real estate investing niches you can focus on: real estate investment trusts (REITs); commercial buildings; large apartment buildings (which usually need on-site management); small multi-family properties (duplexes, triplexes, and fourplexes or quads); single-family properties; small apartment complexes; mobile properties or homes; empty land and occupied land; tax liens; and notes (paper mortgages).

Also, there are different real estate investing schemes or strategies you can focus on: wholesale real estate; buy and hold; and fixers (flipping homes/real estate). Wholesale real estate is an easy investing strategy that usually involves low start-up costs. The “buy and hold” scheme of investing involves renting property and collecting cash periodically, or holding property and selling it for a higher price in the future. Flipping property (fixers) involves buying properties at reduced prices, renovating or improving their features, and selling them at higher prices.

4. Make your own real estate investing plan

The reason why you need a map or plan is that real estate investing is not always predictable; if you face some unforeseen circumstances in the future without a plan, the aftermath can be disastrous.

With an effective plan in place, you would be in a better position to know where you stand, and what to do at a particular point in time without getting lost. Your plan should include your goals and mission statement which have to be associated with the real estate investing schemes or strategies of your choice.

Although you should have goals, keep in mind that goals can be modified or changed a bit after a period of time, and this could affect your overall investing plan—but this is normal.

Therefore, you might be better off being flexible by having both short- and long-term goals so that at any point in time, there would always be a type of goal for you to look forward to.

Your plan should also include the real estate market or areas (for example: commercial areas, high-income areas, or low-income areas) you want to focus on, and expect to become an expert in.

It would be important to include the type(s) of financing deals you expect to use for real estate financing. Do you plan to use your own money to finance deals, or do you plan to loan money from private lenders, banks, equity partners, and other investors, or employ some other creative methods to finance deals?

Your plan should include every clearly defined step you would like to use in making profit; also, include how and where you would keep records of your profits and expenses so you can be in a better position to gauge your finances when the unexpected happens.

Things don’t always happen as expected; therefore, it is extremely important that you have backup plans and exit strategies in place to help you close good deals, and opt out of deals if they aren’t moving in the right direction.

Because you can’t succeed in real estate investing by yourself, be prepared to have a team of professional colleagues to whom you would assign tasks. It is very certain that you would need the services of a mentor, a contractor, a plumber, an attorney, an insurance agent, an accountant, a property manager, and maybe a realtor. 

You need to have a plan for employing the services of professionals who can help you achieve your goals; with every important piece of information included in your plan or roadmap, write down a timeframe in which you expect you achieve your goals.

5. Look for real estate properties to invest in

Before you can start investing in real estate or get involved in a deal, you have to look for a real estate property or some properties, use your schemes to invest at the lowest possible price(s), and do all you can to sell them at the highest possible price(s).

Your profit potential can be negatively impacted if you invest in/buy properties at prices that are too high, and sell them at prices that are not guaranteed to bring good profit.

Therefore, when looking for properties to invest in, look for the ones that would make it easy for you to execute your exit strategies, especially if you notice along the line that you won’t be able to make your desired profits.

Before looking for properties to invest in, have selection criterion in place, and if a property doesn’t make any sense in terms of appreciation, don’t invest in it. Your selection criteria for properties would help to keep you focused on properties that are associated with your niche and investing schemes or strategies.

Examples of a criteria list or selection criteria include: areas or neighborhoods in a town; size and condition of a property; the number of housing units; appreciation potential; cap rate; etc.

For the sake of illustrating selection criteria: let’s say you want to employ the “buy and hold” scheme on only new small apartment complexes, then you may decide to exclude old large apartment buildings and other types of properties from your selection criteria.

Your selection criteria should also include where you would look for information regarding properties: you could look at popular avenues such as newspapers, MLS (Multiple Listing Service), Craigslist, people and real estate agents (word of mouth), Loopnet.com, outbound marketing, LinkedIn Investor Groups, etc.

6. Choose the methods you would employ in financing your real estate deals

It would be difficult to succeed in real estate investing without a financing method in place. If you don’t have your own money, there are other options you can always explore to invest in real estate.

Generally, the types of financing methods that exist are: hard money, owner money, private money, all cash, portfolio lenders, 203k loans, FHA loans, home equity loans & lines of credit, commercial loans, conventional mortgages, partnerships, and other creative methods.

Regardless of the method you chose, only go for deals that make sense financially. To help you decide which deals make sense, you have to know or evaluate the income, cash flow, and return on investment for each deal.

7. Choose how you would market your real estate properties 

In real estate investing, the most important asset you can market is the combination of yourself and your brand or real estate investing business. To market yourself effectively, you need to be a true professional, exude a high level of integrity and some other major qualities.

Apart from marketing yourself, you need to network with other professionals on a consistent basis and build healthy relationships targeted at achieving success in real estate investing. Avenues for networking include local, national or international organizations, social media, and forums on blogs or websites.

You can also market your real estate investing business by direct mail which can be used to send ads to your target audience; however, it is crucial that you have a constant supply of leads to make direct mail as effective as it can be for your business.

By paying for ads and acquiring advertising space on Google and Facebook ads, it would be possible to reach potential renters, buyers, sellers, and professionals from other types of businesses, and keep them as repeat customers.

8. Know when to utilize your exit schemes during real estate deals

Real estate can be a very demanding profession. In order to manage deals involving properties, you need to know when to use the best scheme or strategy to exit deals or investments and achieve your goals which should be targeted at making good profit.

One of the most popular exit schemes is traditional selling: you sign an agreement with a real estate agent and close a deal by paying the real estate agent a commission after they succeed in selling a property you list with them.

It isn’t necessary to use a real estate agent to seal and close deals; if you know how to do it by yourself, then you could use the “for sale by owner” exit scheme and save the fee that would normally go into an agent’s pocket if you employ their services.

If you sell a property to a buyer but decide to continue carrying the mortgage instead of asking the buyer to apply for their own mortgage, then you can use “seller financing” as an exit scheme.

Under seller financing, the seller acts as a bank and puts out a type of loan to the buyer who would make a down payment and continue to make payment to cover the mortgage for the duration of the loan.

Another exit scheme is the lease & purchase option. You can use this option to reach an agreement with a tenant: ask them to make usual monthly payments for a leased or rented property, but let them have an option to buy the apartment at an agreed price and within a certain time period.

9. Get adequate insurance for your real estate properties

Life is unpredictable, and unfortunate things like water leakage, wildfires, and floods could happen and destroy or deteriorate real estate properties. Fortunately, we live in societies that have created platforms to provide insurance and protect people from bankruptcy and losses as a result of unforeseen circumstances. 

Before you close a deal on your rental property, ensure that you’ve ordered for insurance and gotten adequate insurance coverage. Good insurance can help you avoid so many situations you would likely never see coming. 

Get a knowledgeable insurance agent on your team, discuss your options with them, and ensure that they get you the right insurance—and enough of it. A knowledgeable insurance agent would help you secure the best insurance policy.

10. Manage your real estate properties effectively

No matter the amount of effort and time you use to achieve success in real estate investing, you have to manage your properties properly in order to preserve them; if you mismanage them, you could lose them within a short period of time.

When it comes to managing your real estate properties, should you manage it by yourself, or hire a property manager? The simple answer is this: “it depends on whether you have the skills and time to properly manage your properties”. 

Among people who practice real estate investing, some are skilled enough and have enough time to manage their own properties, while some others are skilled enough but lack enough time; yet, some others aren’t skilled enough, but have enough time; so generally, managing properties depends on each individual. 

If you are not competent enough or don’t have enough time to manage your own properties, hire a good and selfless property manager because they can save you a lot of time, keep you away from a lot of stress, and help you focus on your real estate investing business.