If you want to build a real estate empire, you have to start small. By remaining patient and slowly building your portfolio over time, you will see greater results. It’s best to have a split investment strategy. You should use half of your money conservatively, while the other half can be risked through new opportunities. All the while, stay close to home and start small.
It’s every real estate investors dream. Whether you’re just starting out, or you’ve been "in the biz" for years, it’s likely that there’s been a moment when you paused and typed into Google, "how to become a real estate mogul."
It’s a fair enough question. Because in reality, we’d all really like to know.
Top 5 Tips on How To Become a Real Estate Mogul
So, here’s just how to become a real estate mogul, even if you don’t have a lot of money… yet.
1. Start small with real estate crowdfunding
Even if you just have $1,000 to invest, it’s possible to start seeing great returns on your real estate investments in not too long at all. In order to do this, you should consider investing in real estate crowdfunding.
If you have big dreams, but a limited budget, this is the best avenue for you to take. This is because most top real estate crowdfunding companies have very small minimum investment bids, if that. Since there is no way you would be able to invest in the new high-rise office building downtown on your own, this avenue of investing gives the everyman a shot at a piece of the pie.
Most crowdfunding opportunities area available to investors exclusively online.
2. Invest for value add
When the value of a property goes up, those in the real estate business call it "appreciation." Usually, simply by owning a property over the years, its value will increase due to inflation and the improvement of the area. However, due to the unstable nature of the United States housing market, that’s not always the case (just ask people living in Florida in 2008).
However, you can always force appreciation on a property. You can do this by physically improving the property. This is a very popular way to become a real estate mogul. In fact, if you do a simple flip through the top cable channels during television prime time, you’ll come across multiple shows showcasing couples and families involved in forced appreciation, often sporting a toothy grin.
There are many ways to increase the value of your home – and many reasons to do it. You might want to rent out a particular property for more each month, so you spruce it up to justify this increase in the rent. Or, your business model might be to fix up houses and then sell them outright for more than you paid for them.
Either way – buying cheaper real estate (either the best house in the worst neighborhood or the worst house in the best neighborhood) and then spending the remainder of your budget on making the property better is usually more lucrative than buying "Class A" real estate outright.
3. Invest in your own backyard
It’s hard enough to get started as a real estate investor. However, it will be even harder for you if your properties are not within commutating distance of your home base. It doesn’t matter if you are the landlord for rental properties or if you are simply renovating fixer-uppers to resell for profit, you need to be on site – especially at the beginning of your career.
What if a pipe breaks in the middle of the night and your tenants need your help ASAP? What if your contractor (or friends – depending on how low-budget things are) finds a mold infestation in your flip and needs you to troubleshoot for them. It’s important to be close by so you can manage these emergencies as they come up. If not, you’ll easily blow your budget traveling back and forth to the work site while you try to fix the problem.
3. Understand the Real Estate Market
The second reason it’s important to invest close to home is that you will always have a better understanding of the market in your immediate area than of those far away. While it might be tempting to fall for a "the grass is always greener on the other side" mindset and continually look for areas that you’ve "heard" are the next best thing, this investment strategy is actually unlikely to get you anywhere.
This is because you can understand the economy and market trends of your immediate area much better than you can in another city, state, or even country. You’ll hear about changes first hand as soon as they happen. You’ll even experience them yourself and not just be told about them days or weeks after the fact through the grapevine.
By investing close to home, you remain in control and have a better chance of turning a more significant profit through real estate.
4. Trade Up
Once you’ve made a few deals, it’s time to start trading up.
Let’s say you purchase a small block of apartments in a part of town that you know is trending up. The apartments cost $350,000 to buy outright. So, you put a down payment of 20% – that’s $70,000 and mortgage the remaining $280,000 with the bank.
Let’s say all of the units bring it about $5,000 per month in gross profit. But, you spend about $4,500 a month maintaining and improving the property. So, you’ve got $500 a month in cash flow. As you finish the improvements and the area surrounding the apartments continues to improve, you’ll see that cash flow number steadily rise.
Over time, the cash flow will continue to increase, as will the total value of the property. At the end of that 30-year mortgage term, you’ll own an asset worth well over the original $350,000 AND be making thousands a month off it in rent.
But, in the interim, it’s likely that you’ll hit a point where the thousands of dollars of cash flow from this property each month seem like child’s play. You’ll soon hit a point where it’s likely that you can sell the property, outsource its management, or use its profits to invest in larger, more lucrative projects.
5. Assemble the real estate dream team
As you being to scale your business, it’s likely that you will need more and more people around you to support you and build you up. This is because while it’s possible for one person to manage three to five rentals on their own, any more than that is going to simply be too much for one person to bear.
What you’ll need to do in this case is begin to hire paid partners around you to share the workload. You need to be sure that these people share you vision and are willing to take the same risks that you are. In fact, if you consider yourself to be more conservative, sometimes it’s a good idea to partner with someone who’s investment strategy is more aggressive, and vice versa. This way, you can balance each other out.
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