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Investing in a Real Estate as a Business

Investing in a Real Estate as a Business

In terms of traditional business opportunities, few options are as potentially fruitful as real estate. Whether the aim is to redevelop for rapid resale – commonly referred to as “flipping” – or to generate revenue via rental – either through long-term leases or short-term arrangements such as Airbnb – investing in real estate is one of the smarter business decisions a person can make.

With this in mind, it’s important for individuals looking to invest in a new home to go about it in a way which increases the chances of generating a decent profit. Unlike many other forms of so-called passive income, generating earnings via real estate is anything but passive for the property owner. It requires careful planning, shrewd calculation, and a willingness to go the extra mile whenever the situation calls for it, which is often.

All of these elements of real estate investment as a business are demonstrated at the very beginning of the process, at the point in which the investor is deciding which market is right for making their initial move. It’s a choice which hinges on the nature of the investment. For instance, Escondido houses for sale are smart for those planning on developing short-term rental opportunities, since the year-round warm weather and in-demand location will likely mean it’s being occupied for the majority of the year. Homes bought in an up-and-coming market such as Raleigh-Durham, on the other hand, may prove more lucrative as flipped properties.

Getting directly involved in real estate for profit is likely to rock the financial boat you’ve been piloting ever since you began putting money away and making standard investments. It’s a good idea to schedule an appointment with your financial advisor before and after a major real estate purchase to go over the plan with a fine-toothed comb, followed by having a portfolio rebalancing done to get everything squared away on paper. This way, there are fewer chances for surprises to pop up in the months ahead, especially around tax season.

Are you familiar with working with contractors? How comfortable are you in conversations about construction methods and costs? It’s important to have a sense of the real estate business both inside and out, in order to have a better hold on your investment. While it’s not necessary to get a degree in structural engineering with a minor in residential architecture, it’s worth brushing up on the basics of home construction and the anticipated costs of a given home improvement project. Either as the owner of a rental property or the overseer of a rehab project, the process of doing repairs and renovations is unavoidable if buying a home as an investment property is the goal.

In both goods times and bad, everyone needs a place to live. This means a certain level of security for those with an interest in real estate, but only if they manage their property the right way. The truth is it’s all too easy for would-be residential real estate investors to slip once or twice and wind up breaking even at best. In order to successfully engage in real estate purchase for profit, know your market and know your product. In that sense, real estate is like any other business.

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by Harvey Carr // Harvey Carr is a contributor to Businessing Magazine.

Opinions expressed by contributors are their own.