For people who are not good with the employment sector, and would love to be self employed by the age of 37 years, starting a real estate investment company would be the best idea to consider. There are few considerations that must be made before you blindly jump into the fray and have your money lost. Here is a guide on how to start a real estate investment company, and be successful at an early age.
Tips on How to Start a Real Estate Investment Company
1. Understand the How the Process Works
It is wise to venture into something you can understand and interpret. Companies dealing with real estate basically handle two basic things.These are:
- They invest in real estate.
- They trade in real estate.
The real estate investment is practically a long-term form of investment where you pump your money in a real estate with an intention of keeping properties purchased to rent out.
As you do this, you may also consider real estate trading. This is a short-term form of investment wherein you purchase property that needs modification and fix ups. You later flip this property for a higher price soon after. You may also buy properties at a lower price and later sell at a higher price to make profits.
For a more profitable investment, you should consider setting up all these products if you need expert tips on how to a real estate investment company. The long-term trades will be aimed at securing the future of your business. On the other hand, the short-term investments will help in running the daily needs of the business.
The best gear on how to start a real estate investment company is having a higher initial investment. This will help you acquire more desirable and appealing properties for your market to rent out. Just like any other business, you need to be unique and creative enough to bit the stiff competition, and sustain it in order to survive in the market.
2. Have a Proper Financing Plan
You need good financing to start off your real estate investment on a strong foundation, and give you valuable advice on how to start a real estate investment company. Unless you are wealthy enough, you will need ways in which you can pay for the investment properties you buy at first. Many options exist on how you can easily secure financing for your new company.
You may consider finding a wealthy partner as the first option. Some investors may have the money but lack skills and ideas on how to invest. Take advantage of such investors to come up with a brilliant and convincing business plan that will attract their attention.
Once you have secured a worthy investor, have an exit strategy out of the comfort zone. Grow your company and exit the relationship once you are stable enough to have full control of your activities as working in partnership may have related challenges.
It is also advisable to secure more than you might need when getting into the business. The extra capital allows you to do any necessary refurbishments to properties to help increase the selling value or increases its monthly rental price. Either of the options will help boost the overall profits and even do more than just breaking even.
3. Ensure Proper Legal Set-Up
You can decide to buy properties in your name and proceed with your business activities. However, this will be committing financial suicide and business failure. It is advisable to come up with a business name for your business to handle all the transactions instead of using your personal details. Various options exist based on the tax status you will be willing to work with.
Most real estate companies would prefer setting up their business as limited liability company (LLC). The option allows you as the business owner to separate yourself legally from any forms of liability to protect your personal property, and other related finances in case of catastrophic failures such as lawsuits. Always seek advice on how to start a real estate investment company.
Creating a limited liability company is not so hard. The two main requirements needed is to file articles of incorporation with the various state agencies, and maintain your business within the state with the right reputation.
When setting up a limited liability company, remember to seek advice from a real estate attorney with enough experience in real estate issues. In addition, you might also request a qualified financial advisor to do the actual paperwork on your behalf to help know if other incorporation options may be reliable for your new company.
4. Address All Insurance Needs
Incorporations will not protect your business from any forms of litigation that arise from accidents and unsafe conditions. The best option for this case is having a reliable insurance. When doing long-term investment properties, you may need to have iron clad insurance policy plan. The policy should clearly stipulate what is covered and the responsibility of the renter as well. The tenant in this case must be given a clear agreement of tenancy and sign for them to take care of any responsibilities of damage during their tenancy term. Seek an insurance expert to give you policy options and advice on how to start a real estate investment company.
When dealing with short-term investment properties, you should consider short-term insurance policies. You may not survive with one, but may not need to lock yourself into a costly long term contract if the property might be sold as soon as you get a seller.
Be sensitive of the fact that there will always be exclusions whatever the type of insurance to choose for your company. The various policy options may not cover such eventualities, making it quite necessary to incorporate the business to protect yourself. For instance, insurance policies may not cover black mold yet it is a common problem for property owners.
5. Consider a Realtor
At the start of your business, there is this temptation of skimping as much as possible in order to grab the lion’s share of profits generated from sales. This is not best the way to go. No matter the amount of research you do, you will not be an expert the first time you purchase properties. Involve a trusted realtor to save you the headache and hustle involved in getting new markets. Seek professional advice on how to start a real estate investment company.
Realtors have been in the real estate business and perfectly understand markets within specific geographical regions than you do. Your driving goal should be to get the worst houses within the neighborhoods and refurbish them around to reap the best profits. Realtors have done a lot of homework. With a small percentage, they will work hard to constantly give you better deals.
Recommended read: How to Prepare for Investing in Real Estate
In general, when starting up this type of business, you should be cautious of starting too small. The idea of starting small and later growing bigger in the business may seem wise, but may not be the best option. Small single family homes and single unit properties are attractive especially to newbie investors. However, you should take note that the profit margins that will result from such properties may end up being swallowed by renovation budgets, maintenance costs of the property, and mortgage. For this reason, try to aim higher for bigger profits as smaller units may not have much in terms of productivity.
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