4 Points You Must Note Before You Start a Real Estate Business
As one of the richest men alive, Warren Buffett, has said that people should not depend upon only one income source rather they should have multiple income sources. If one does not have a second income source, he/she should create one through investment. This is what often the real estate business is all about. It will not be untrue if I say that real estate business is one of the oldest and most probably one of the profitable ventures for investment. Everybody loves to become a landlord. However, if you are virgin in this industry, you will certainly be bombarded with hundreds of investment options in the real estate market and it is highly possible that you end up investing your money in a mediocre real estate opportunity. Therefore, in order to guide you, here are a few important things in the real estate market that you should know before becoming a landlord:
1. How to Buy the Right Property?
First of all, you need to decide whether you have a large investment for buying properties or are only intending to purchase properties. After you have decided, you now need to go for inspecting multiple commercial and residential properties. It is advisable for you not to purchase a property at retail price unless the current real estate market is showing an uphill trend and the cap rate is above 10%. Don’t decide right after seeing a house based on your human emotion as you always need to check its current market rate and value in the market.
2. How to Value a Property Accurately?
There are various methods used to calculate the exact current market value of a property. It will be a great idea if you can use neighborhood comps, which have been put recently for sale or have been sold out lately. For this purpose, you can consult a real estate agent as they have Multiple Service Listings (MLS), which is a database of the properties sold in a given locality. It will certainly help you find what the neighborhood comps for a given property are. In this way, you can calculate the exact current market value of the given property.
3. What If You Are Using a Loan To Buy Property?
If you are trying to buy a property through a loan, you should be coming up with a full-fledged plan. For instance, you need to calculate your interest, tax and insurance rate using different online web resources. They will give you your ROI status and if it is greater than 8%, it will be prove a profitable investment for you in the long run.
4. Buying Property through Mortgage Loan
If you are getting a mortgage loan to buy a real estate property, you need to consult a professional and experienced real estate agent to invest your money gained from mortgage loan in a profitable manner.