Opportunities for a real estate investor in today’s world are endless, that is, if you know what to do and how to do it! To generate material wealth by investing into real estate is still one of the best ways to become financially independent. “The first step in creating wealth is to look at what is holding you back from seeing your money grow.
Opportunities for a real estate investor in today’s world are endless, that is, if you know what to do and how to do it! To generate material wealth by investing into real estate is still one of the best ways to become financially independent. “The first step in creating wealth is to look at what is holding you back from seeing your money grow. The answer to this confounding question is quite simple – it’s you! So, the starting point is that you have to start leading yourself to make changes. Without changing yourself, nothing significant happens”.
If you are serious about improving your way of life and you know that real estate investing is the vehicle for that journey, then let’s get you started right away. To create wealth through real estate we have identified some actions that you must take immediately to receive that passive income you deserve.
Start in Growing your Network
Ever since that first human traded mushrooms for meat with another human, relationships have been the fundamentals of all business transactions. Relationships are formed and must be cultivated in a business success network. You will see something magical happen when you embrace this mind set into your Real Estate investing business. Where there was once nothing, opportunities will appear, seemingly out of thin air and people will be calling you for your business.
When your network grows and becomes stronger by the day, the great property deals you’ve heard about, but could never seem to find, will find you. The best tenants will call you to rent your properties before you have started to advertise. Best of all, you will experience increased results with less effort. When you follow our online advice you will learn in how you can accelerate the growth of your network and with that how to start building your own property portfolio.
Knowledge is the Key
Would you build a house without a building plan? Probably not…. and just like a house you should never build your business without a business plan. This blueprint, or system, is the most important part of your business. Our ongoing educational email service will assist you in gaining enough information and knowledge to start building your own property portfolio in time.
What are the benefits of inviting in Property?
You retain control of your money and investment at all times – you are no longer at the mercy of the performance of asset managers.
Property investment requires little or no capital or monthly investment – you can use the bank’s money (in the form of a home loan) to buy property and pay back the home loan using the tenant’s money.
Building and managing your property investments takes very little time and effort once you have put the system in place – a property investment company to help you take care of the details and management agents to manage your tenants.
Property creates a monthly passive income that keeps up with inflation for as long as you keep your property.
While you are earning a monthly, inflation-hedged passive income, your properties are also appreciating in value.
It is almost impossible to make a really bad property investment – your returns may be less spectacular if you buy certain properties, but overall will still beat the returns offered by traditional investments.
Property investment is a long-term strategy and less vulnerable to changes in the market and the economy.
You can increase the value of your property and your return on investment in numerous ways.
Property investors enjoy exceptional tax benefits.
The risks inherent in property investment can be mitigated, avoided or insured, making property the only investment class that offers low risk, but high returns.
Weekly news and motivational information
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Tips and Trends – Property Wealth Creation
To generate material wealth by investing into real estate is still one of the best ways to become financially independent. “The first step in creating wealth is to look at what is holding you back from seeing your money grow. The answer to this confounding question is quite simple – it’s you! So, the starting point is that you have to start leading yourself to make changes. Without changing yourself, nothing significant happens”.
What supports the above statement?
The greatest wealth creation approach is using other people’s money, a strategy that is used by the most successful investors around the world. For example, if you buy a property for
R1, 000 000 with 20% of your own money and you take a loan of 80%, you only stand for 20% of the risk. If the property value goes down by 20% you have lost all your money but if it goes up 20% and you decide to sell you will have just doubled up your investment.
To own bricks and mortar has always been regarded as the safest investment, but the real power of real estate investment is your rental income. Just imagine that putting down 10% of your own money, for example R100.000 on a R1.000, 000 properties and immediately start to receive several thousand Rand’s per month in rental income.
Yes, you will have expenses and bond payments to cover, but it can still be a very profitable investment, especially when the bond has been paid off by using “other peoples” money
(Use our bond calculator to work out some scenarios!). The key in your investment lies in the fact that you should try to acquire a property that creates a cash flow positive scenario, which helps to pay your bond quicker.
Once your bond is paid in full, you will be not only the proud owner of your property that has gained on value, but you will have created a passive income which can be used to purchase and finance additional property. To invest into the right type of property is always dependent on the area or town you live in, or on your personal circumstances and on how involved you would like to be with managing your own properties. When it comes to real estate investing, the choices are endless. Should you invest in residential homes, sectional title flats or blocks of flats, commercial property, industrial property, office buildings, holiday flats, new developments etc.? You will have to ask yourself the question, should I specialise in one type of building or should I diversify into several real estate types?
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Your First Rental Property Purchase
Purchasing rental properties is by no means rocket science but if you don’t know how the process works properly, it is easy to make expensive mistakes that could wipe out your bank account, ruin your credit rating, or even bankrupt you. The good news is that mistakes like that, are easy to avoid as long as you plan ahead, think before you act and base your decisions on logic, not emotion.
To own and rent out residential property is a great way to build wealth and contrary to popular belief, you don’t need to be rich to get started. However, it’s also a good way to go broke if you start without a good plan. Being a landlord is a business and if you want to succeed you need to do it based on sound business practices. Before starting your new career as a property investor, ask yourself the following questions. Your answers will help you to decide if you are ready to be a real estate investor and landlord.
How are your people skills?
Letting out property means dealing with tenants and their demands. If you don’t have people skills you’ll have to learn them – at least if you want to manage your properties yourself. If you can’t or won’t learn how to deal with tenants yourself, you can always hire a property management agent to do it for you. If you go with a letting agent, make sure you are accounting for it in your cash flow calculations.
How are your handyman skills?
Often the best property deals are what the industry refers to as a “fixer upper”. This could be properties that are selling under specific circumstances. These circumstances could include; the property being vacant for an extended period of time, the property needing a lot of work or a property that has been vandalised.
If you have good handyman skills you can build up a lot of equity by buying these properties and fixing them up yourself or with the help of a troop of workers that you manage yourself. If you don’t have the skills to deliver a decent renovation job, stick to properties that don’t require so much work. Buying a house and letting it sit empty because you don’t have the skills or other means to fix it up and get it rented, is a fast way to go insolvent.
Can you make decisions based on facts instead of emotions?
If you want to succeed as a property investor, you have to base your decisions on fact, not on emotions. When it comes to invest in your properties, you clearly have to make purchase decisions based on economic factors such as costs, potential rental income, and capital growth and not on how much you personally like the property. Do not ever get emotionally attached to a property – it is an investment, not a keepsake. If the property will not allow for the necessary cash flow, is located within an area unlikely to attract good tenants, or it needs more work than you can afford to do or skills to do yourself, don’t buy it. To buy a property on which you are going to lose money on is a bad business decision no matter how cheap the price is, how “cool” the property is or how friendly the neighbours are.
What is the housing market like in your area?
It is extremely important to know the market in which you operate, simply to avoid paying too much for your rental properties. Do you know what residential homes are going for in your area? What causes one house to sell for 15 or 20% more than a similar house in the same neighbourhood or suburb? When you start to viewing more properties, certain things will begin to stand out. Studying your local market will help you decide where to find the most productive rental properties in your area. You can find a full explanation on how to establish a comparison analysis on the In2assets website. Look for lower value properties in prestigious areas as your investment growths will most likely be more stable, larger and quicker.
What is the rental market like in your area?
What type of tenants will you find in your new market and who is renting to them? For example, if there are already a number of landlords targeting university students or senior citizens in your area that puts a downward pressure on the average rentals…. be cautious .Too many rental properties in a neighbourhood can have the same effect. Try to buy properties in a suburb that are mostly owner occupied or specialise in servicing tenant classes that are currently under-served in your area.
To create a projected rental income scenario you need to know what rental amounts are paid and for what type of property within that specific area. To do that you will have to call an Estate Agent or Letting Agent within that area and study “TO LET” advertising thoroughly.
If you join the In2assets “Real Estate Buyers Club” we will provide you with a comprehensive range of template formats to master your home work quickly.
Can you afford the property?
It is all about affordability and if you cannot afford the property, don’t buy it – full stop! It sounds obvious but every day people buy property or other investments they can’t afford. How do you know if you can afford the property? Just submitting a deposit payment and qualifying for a loan is not enough – you also need enough income from your regular job to cover the monthly payments until you get the property rented. You also need to provide for vacancy if the tenant is letting you down or the property stands vacant until a new tenant is found.
What Cash flow will the property generate?
To become the owner of rental properties isn’t a get rich quick scheme, and most people don’t have a big pile of cash just sitting around to pay down on a property.
Before you do your market research you should be in a position to have a substantial down payment. Start looking into different ways of financing the rest of the price of the property by involving our Bond Originator and bond calculator, which you will find on this website by following the link. The main question is, will the property rental income cover your expenses and produce consistent income for you every month and how can you achieve that? Look for residential homes that are either big enough to divide into two or three rental units or for property with granny flats or outbuildings that can be converted into additional income generating letting units. This is often possible if the house is an older house and was built in an era where it was common to have big spacious rooms and buildings. To achieve a cash flow positive situation, the property must be able to fetch sufficient rent and should be located in an area that will attract quality tenants who want to stay in that area and are prepared to pay. A “sufficient rent” can be defined as 1% of the total cost of the house or flat. This is not always achievable straight away but property out of the distressed market will often be cash flow positive from the onset.
Visit our website frequently to keep up with new property stock, of which some are; bank sales, liquidations, diseased estates and voluntary transactions. If you become a member in our In2asstes Real Estate Buyers’ Club, you will have the privilege to have access to all new distressed property stock before it goes into the open market.
Select Your Rental Property
Once you have done your market research, saved enough for a down payment and arranged financing it’s time to start looking at properties. For most buyers, single family homes are the easiest and safest choice but flats, duplexes and small apartment blocks (up to 4 units) are also good choices.
There are still a few more things that you need to consider when buying a property.
If you buy a freestanding single home, you will be always the “landlord” and you will have the say on your own property. If you purchase in an apartment block or a gated community you need to know that there will always be a body corporate elected by the individual owners who will be in charge of running most of the affairs of your property. Both options have advantages and disadvantages that one needs to carefully consider. As a member of In2assets Real Estate Buyers’ Club you will have free access to our property glossary and legal advice that may assist you in making the right decision.
Buy Your First Investment Property
Once you have found the property that suits your needs and the one that you can afford, it is time to sign an “Offer to Purchase”. Please be aware that an offer to purchase is a binding agreement and needs to be studied thoroughly before the final signature takes place. Make sure that any specific arrangements or clauses that have been discussed verbally are put in writing on the contract to protect your rights. Furthermore it is important to know that the transaction is based on the law of the consumer protection act. This covers the buyer’s rights and the seller’s duties, which should be studied prior to signing of an offer. Make sure that your offer stipulates the exact buying terms and if the property is subject to finance a time frame must be set. Should you do a private sale transaction with no agent involved, you will be in a position to receive all necessary documents from In2assets (only once you are a member of our Real Estate Buyers’ Club).
Get Ready To Rent Out
If you buy a property with an existing owner or a vacant property, the conditions of the sales agreement are often that the purchaser has to take over the property immediately.
That means you better prepare yourself for a quick takeover and arrange to be in the starting blocks straight away.
Do you intend to do the fix-up work yourself or hire it out? How long will it take you to get the property ready to rent? Besides getting the property itself ready, you need to get yourself ready. What conditions will you place on your tenants? Do you have a good rental application and rental agreement? Not to worry, if you are a member of our Real Estate Buyers’ Club you will have access to all supportive paperwork and tips that are needed to let out your first property.
Find And Keep Good Tenants
It can be very difficult and expensive to get rid of bad tenants which can also eat into your cash flow. It is therefore extremely important to do a thorough job when it comes to tenant screening before signing a rental agreement. A professional rental application that entails important questions about the tenant and the check of employment and previous landlord references is an absolute must in this process.
If you are a member of In2assets Real Estate Buyers’ Club you will have access to credit check facilities, tenant application forms and rental agreement templates.