Real estate businesses are growing in prominence as every year passes by. This is because they’re seen as massive money-making ideas that have very few risks attached to them. The hardest part of running a real estate business is raising the capital to make your investments. But, once you have the properties, then it’s usually much easier to make a profit than it is to make a loss.
Of course, this is a very generalized view of it all! Make no mistake about it, there’s a lot that goes into running a real estate business. What’s more – much like the properties you’ll buy – your company needs to be built on solid foundations. If you can do this, then the chances of success will increase.
So, what are the foundations of a successful real estate company? If you’re a budding entrepreneur, then here are some things to consider:
Extensive knowledge of real estate trends
Firstly, your company needs to be built around an extensive knowledge of real estate trends. You must be aware of what markets are attracting the most attention as they can bring in the biggest returns. It was recently in the news that Europe is back for real estate investors after an impressive 2017. If you’re aware of this, then you know that investing in European properties is a genius thing to do right now. As such, you’ll get started and bag some very sound investments. If you didn’t know this, then you’d end up missing out on all this potential!
The only way you’d recognize this trend is if you have a broad knowledge of what’s going on in your industry. So, never start this business unless you’re fully clued up on the real estate industry and have plenty of reliable information sources to call upon.
A clear business model
You can’t run a business without a business model. It’s almost like trying to build a house without looking at any blueprints. Sure, you may be able to get so far, but you’ll eventually fail as you just need the direction. With your real estate business, you need a plan in place for how you’ll make money. Are you going to solely look into buy-to-let properties or will you focus on flipping them? Deciding on your business model is crucial as it influences the type of properties you’re looking at.
I’m not in a position to claim which method is best as there are examples of properties having a tremendous amount of success with both. Likewise, nothing is stopping you from combining the two and making money both ways. All that matters is that you have a clear plan and model in place to look at and follow. Without this, your business will crumble due to weak foundations.
Spreading your money
The next thing to take into consideration is how you use your money. Naturally, real estate businesses require more capital than most, when starting up. Here, you are faced with two options. Do you invest all that money into one property and build from there, or do you spread that money across multiple investments? The reality is, there’s only one right answer; you spread your money!
This means that you’re taking on multiple investments, opening up numerous revenue streams. To do this, many people will try and raise startup funds, then apply for various mortgages using the money to secure down payments. From here, they can buy different properties. By doing this, you’ve got many different avenues of making money. But, more importantly, you have safety nets in place. If you invest in one property, and something goes wrong making it flop, then you can lose a considerable portion of your investment. However, if money is tied up in multiple properties, then it may not matter if one starts doing bad because the others can recover any losses – and then some!
I’m not suggesting you have to start investing in hundreds of properties right away! But, even if it’s just two or three, then that’s better than one. After all, the aim is to grow your portfolio until you own as many as you can handle.
In conclusion, these are the foundations of a successful real estate business. Get your knowledge up to scratch, and then improve on it even further. Set up and employ a clear business model that everyone in your company will understand. Then, make sure you’re always looking to spread your wealth as much as you can. Of course, all of these things won’t instantly guarantee success as there are other issues to contend with as well. But, with them in place, you’ve got some pretty solid foundations to build on.