Real Estate Investing 101...

By: Jide

People in different countries across the globe are beginning to appreciate the benefits of real estate as a wealth management tool. People are even going as far as taking courses and attending classes designed to teach the art of making money from the real estate market. While the move to take up a course or class to study real estate investment is a step in the right direction, one does not necessarily have to spend hours in class or cough up dollars for courses to know how to make money from the real estate market.

There are principles of investing in real estate that should be known and followed by every investor regardless of their level. Below are principles of real estate investing, serving as a guide to all investors as they make their decisions.

Education is Paramount

The first principle of real estate investing, just like any other investment tool, is education. It is always important to intimate yourself not only with the knowledge of real estate sector, but also on how to manage relationships with people.

Learning about the sector and people are critical factors necessary for a successful real estate investment experience. In addition to learning about building and maintaining relationships, it is important to equip yourself with the latest marketing techniques especially if you are delegating the job to an agent or real estate company.

Real estate investors – buyers and sellers, require a lot of information and this could make or break a potential deal. It is therefore imperative for you to learn as much as possible to ensure a smooth and rewarding investment decision.

Do your Research

Sequel to the principle of education mentioned above, it is also important to do your research before taking a real estate investment decision. Researching about a property and a market can sometimes be the difference between making huge profits and losing out on an investment.

While the task of researching can sometimes consume time, efforts and other such resources, the benefits usually outweigh the cost. As a real estate investor, it is required that you research about the market, particularly on properties that will be in demand in the nearest future. This puts you in a vantage point, allowing you to buy low and sell high, which is the goal of any investor, regardless of the investment instrument.

The research will also include inspecting a potential property and the neighbourhood that hosts it. This gives you knowledge of the conditions that might reduce the value of property or make it less desirable to tenants, even before you become the owner.

The Money is in the Purchase

Real estate investing is similar to value investing in the stock market, where you look to purchase when the market is down. This allows you to enjoy a huge capital appreciation when the market eventually picks up again.

Therefore, it is important that you do some valuation of the property before making the purchase. Remember, the money is made in the purchase.

Cash Flow Monitoring

Another important principle of real estate investing is monitoring the cash flow. Real estate investments would usually come with monthly rental incomes that are subsequently used in paying for mortgage instalments and any other problem that needs to be fixed in the home. It is therefore important for you as an investor and homeowner to closely watch interest hikes to be sure they do not erode your estimated ROI.

Once you have adequate cash inflow, it is advised that you save for the rainy day. This is necessary if some tenants might decide not to renew their rents. This also helps you in reinvesting some of the saved fund in another real estate investment, helping to diversify and increase your investments.

Other People’s Time

One of the most popular investment principle or terminology is Other People’s Time otherwise known as OPT. This principle is also applicable in real estate investment as it is important to delegate tasks, especially those you are not particularly good at doing.

As an investor, you cannot do everything on your own and would therefore need to hire the service of contractors and professionals to handle things you are not good at, while you focus on your strong points.

If you are an expert in interior decoration for instance, it might be best you look for deals and focus on designing the property. This allows you to follow one of the oldest investment principles of all time – leveraging on other people’s time. This also gives you the time to look for more investment options while you make money from the existing real estate properties.

Another benefit of leveraging on other people’s time is that it helps you build a team of dedicated people that helps you make more money from the real estate market.

Network with Professionals

As mentioned earlier, building relationships is one of the most important success factors in real estate investing. Therefore, networking with professionals in the real estate sector helps you to get the latest information and deals in the real estate sector.

By networking, you learn from the best in the game and leverage on their expertise and experience to build a formidable real estate investment portfolio.

Leverage on a good rainy cash balance

Many real estate investors have been said to start off with little money. Even large-scale developers have realised the power of leverage when investing in property deals. Leveraging as much as possible allows you to control property worth multiple of what you actually own.

However, always remember to save for the rainy day, which is usually a fraction of the rental payments. This ensures that you remain liquid even when unit occupancy of your property falls.

Toronto is one of the fastest growing cities not only in Canada, but the whole of North America. The Toronto real estate market is also growing; becoming one of the most profitable Toronto investment options and consequently drawing the attention of investors from across the globe.

Investing in Toronto’s real estate requires having adequate knowledge and expertise like the principles mentioned above state.

Thankfully, real estate companies like ours, an asset management and wealth creation company, help people profit from the real estate market without necessarily having to spend the time and effort required in making tactful real estate investment decisions.