I discovered this interesting and well-worded opinion article on Property Management Daily:
The secret to acquiring wealth is real estate. The economy may rise and fall, but real estate will remain one of the most reliable investments a person makes. The reason for this is simple: everybody needs someplace to live. With a demand like that, property is the only investment that will always have buyers. Smart owners understand that in order to be an effective property owner, hiring the right managers and helpers is essential.
So how do you go from chump to Trump? While it is certainly a challenge, it is not impossible. Rather than becoming an apprentice, learn how to hire your own! Following these steps will put you on your way to establishing and managing your own empire.
1. Start Small
The average person spends almost half of his or her total lifetime income on housing costs. While this staggering setback affects everyone, it is not insurmountable. The easiest way to begin your dynasty is by owning your own land. When you acquire several pieces, then you can start hiring your own personal lackeys, like the lords of Shakespeare’s time!
Renting is never an option for those hoping to own multiple properties in a lifetime. Many people resign themselves to renting during the first five to ten years of their adult lives, instead of paying that same monthly bill on a less luxurious house or condo.
While your first living arrangements may never make it onto an episode of Cribs, you’ll recoup all of your losses and often turn a profit when it is time to sell. The only way to own a big house is to sell a smaller house, and the only way to own a smaller house is by always choosing to buy instead of rent. After that, it becomes a game of flipping, and managing managers. Picking an astute property manager is important for owners, too.
2. Expand Slowly
Once you’ve landed on your feet, and have found yourself in a house you are comfortable with, it is time to hire that property manager for additional properties. The journey of a thousand miles begins with a single step, which is why this expansion process should go slowly, and should only be attempted by those serious about their investments.
Purchasing and then renting an apartment is a great idea, as the monthly rent paid by someone will be applied towards your eventual ownership of the property. Start with whatever unit you can afford (ideally a property with costs that wouldn’t cripple you if it took a few months to find a tenant). The great thing about having reliable help with management is that it frees you up to invest even more in other property.
3. Reinvest profits
The number one rule in business, Vegas, and life, is to always reinvest your profits. While it can be tempting to start collecting your hard-earned dividends, reinvesting them will prove to be much more beneficial in the long run.
While it may be tempting to take profits and go on vacation, reinvesting it in more properties, or making property upgrades, is vital in amassing and maintaining a position of wealth. A small investment in the best management will save you tenant turnover, too. From here, it becomes an exponential formula. The more property you own, the more income you generate. The more income you generate, the more property you can buy. Keeping this machine fed will ensure that you are financially stable for years to come.
4. Pre-Sale is your friend
Finding good properties at value prices can be something of a challenge, but there is one time when a condo, apartment, or home is always at its most affordable; before it is built.
‘Model units now open’ is a sign that should read, ‘get in here and make easy money’. Pre-sale homes and condos are always 30-50% less expensive than the same homes or condos a year later, based simply on the fact land owners often need those sales in order to finish the overall project. By getting in on the ground floor, and purchasing units in a building that is not yet open, you can guarantee return on your investment, and allow yourself far more wiggle room in your portfolio.
5. Begin to Take Bigger Risks
Years passed, and your flow of income is abundant: capable property managers are running things with minimal supervision. It is at this phase that people have the opportunity for rewards, if they are willing to take risks. The number one phrase in real estate is ‘location, location, location’. However, as agents will tell you, prime locations do not always stay prime for very long. Subsequently, areas that are less than ideal (and in some instances downright dangerous) could be the hot new ‘it’ place of tomorrow.
Being able to spot these trends could be the difference between millions of dollars made and lost in a short period of time. Chicago’s Cabrini-Green housing projects were once the worst in the nation. Now they are the site of upscale lofts and million dollar condos. Those who were ahead of the trend were able to buy tons of property for next to nothing. Now, the sale of that property could easily finance their children’s college, marriages, and retirement.
6. Stay Educated
It has all sounded relatively easy thus far; buy some land, make some money, buy more land, repeat. However the truth of the matter is the successful real estate tycoon treats this side investment as a full-time job.
For those hoping to succeed at owning multiple properties, education and having a helpful property management company are both a must. Reading home listings, going to open houses, watching market trends, and paying attention to lending rates, are all part of the necessary activities that successful real estate moguls participate in daily. While this all seems overwhelming, the reality is that it is common sense. Buying low, selling high, and paying attention, are the keys to success, but they need to be closely monitored in order to guarantee profit.
While the road to wealth seems particularly elusive, it is not overwhelmingly difficult to find. Although not everyone wants to own massive lots of property, keeping these tips in your repertoire will keep you fiscally wise and may benefit you greatly, no matter what your endeavor. Even those who own only one or two apartments can benefit from the added security, without any additional grief, when they enlist the help of property managers. If you want to feel secure, whether or not Social Security exists when you retire, take these ideas to heart!
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