As a young, impressionable lad in my late twenties, I had a lot to learn about business. Most of that education would result from experience. My mom worked in a customer service role in a small, family-owned lumber yard and my dad delivered mail. My parents were as far removed from business owners as a frog is from feathers.
Until I got involved in real estate investment, I didn’t understand that owning your own business took hard work and due diligence. To me, the local merchants I admired simply opened their doors and watched the money roll in. I had to participate to figure out that merely having an employer identification number didn’t necessarily mean a Benz would automatically appear in my driveway. But because I wasn’t afraid to get my hands dirty or seek advice from other property owners, I learned a thing or two about investing in real estate and building a successful business.
Reasons to Invest in Real Estate
Constructing a viable real estate portfolio came about through many trials and a few errors. However, once I got the hang of buying, renovating, and selling homes, the time I put in far outpaced the money I spent. My relatively low startup costs stood out as one of the main reasons to start a real estate investing business. Let’s explore some of the other advantages.
Doing It Yourself
I never considered myself to be handy. I could paint—but who can’t? Fortunately, many of my friends were contractors—plumbers, electricians, carpenters—and I was a quick study. Before I had kids and my weekends weren’t inundated with soccer games and birthday parties, my pals and I had time to get together and exchange labor. They helped me with fixtures and faucets and I offered spackling, sanding, and staining in return. Before long, I could handle a lot of basic wiring and rough carpentry. Those skills cut down on my rehab costs and helped boost my ROI.
In the late ‘90s, everyone hopped aboard the dotcom train. I couldn’t have a conversation with a stock investor who didn’t brag about all the money they made on the meteoric rise in internet companies. And then, poof—many of those stocks went from hundreds of dollars per share to zero. Meanwhile, my properties remained pretty consistent. Of course, the real estate market saw fluctuation but my home prices stayed relatively stable through the time periods that I’d held them.
Many business people I knew brought some type of specialized skill to their company. Even if they’d worked for years in marketing or manufacturing firms and figured it was time to go into business for themselves, it wasn’t so simple. In most cases, they needed office space, design facilities, employees, etc., and their startup costs and overhead formed a big nut to crack.
On the other side of the coin, anybody, even I, could buy a home. My first purchase required a capital investment but with some negotiation and good credit, I was able to hold my initial investment to 5% of the sales price. I didn’t have to make many repairs and the units were already occupied. I met my mortgage obligation without having to dig any deeper in my pockets.
I’d lived in the same region of Pennsylvania all my life. I hadn’t needed to do much research on the neighborhoods where I planned to buy. Simply reading the daily newspaper for years, I knew which schools averaged high standardized test scores and which proximal towns had great restaurants and nightlife. My familiarity with nearby markets gave me a leg up on out-of-town buyers who had to play catch-up. In addition, my sphere of influence afforded me a number of connections who had an inside track to appealing deals.
I never put all my eggs in one basket. Investing in hard assets added to the contributions I’d made to a 401(k) and some exchange-traded funds. The problem became that much of my stock and growth mutual fund portfolio moved in lock-step. When the Dow Jones Industrial Average suffered corrections, often the market prices on my properties were unaffected. By spreading my dollars among different asset classes, I reduced my risk by not overexposing myself to one type of investment. Diversifying with my real estate portfolio meant that any paper losses I encountered were minimized by holdings that weren’t correlated.
Building an Investment Business for the Long Haul
I’ve come a long way since the days when I thought every business person set up shop at the end of a rainbow. It took time, a lot of hard work, and hands-on commitment to understand that those particular virtues played a vital role in my successful real estate venture. When I became an independently owned and operated HomeVestors® franchisee, my local HomeVestors franchise network did their best to see that I made the most of my business. In addition, I got access to some of the best real estate investment valuation tools and lead-generation programs to foster a winning real estate investment strategy.
Contact HomeVestors® today to see how they can advance your real estate business to the next round, and beyond.
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