Understand what do you want to achieve with real estate investing this way
Investing in real estate should be considered as a business model/startup and not just a strategy for getting involved. More often than not, people who invest and leave their assets as standalone options tend to miss out on having a connected portfolio that leverages each other to grow.
For example, as a female entrepreneur who needs to keep a positive outlook on my dressing with a budget, I keep a mental note of what I have in my wardrobe when next I am going to buy either clothes or accessories. Instead of each time going out to buy a completely new set of clothes plus accessories, I think of ways that I can combine, match and rematch the ones that I have to make my wardrobe seem richer than it actually is.
A similar approach applies to starting a new business; you will need to think of all aspects to include product development, marketing, sales, admin and accounting to ensure that you are making money in the end/long run.
Real estate investors need to think of their assets as money that can and should serve each other – there would be times that you can leverage one to improve the other. That also is the difference between knowing that you have a portfolio and not just multiple assets.
In my last two years especially in helping millennials to invest in real estate, I have started keeping track of what and where my clients invest so that I can better refer them to new opportunities that are either similar in nature or benefits and align with their goals.
Professionally speaking this is known as portfolio building and management and to say that this has changed how my business and their investment goals are looking now is an understatement – there is commendable growth across both lines.
Another thing that has further grown their investment portfolio value and potential has been pooling resources; commonly known as crowdfunding or co-investing. There is a group of friends especially who are perfecting this strategy amongst themselves and killing it with their list of assets that are continuously generating cash flow – you can do this too.
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Co-investing is not as hard as it looks on the outside but if you do not know what you are doing then chances are that you will lose not only all your resources but also the zeal for investing altogether.
To get started with co-investing, there are three things you need to be sure of from the start
1. How much you want to keep investing per time (budget) – this will help you know which type of deals you will need to be on the lookout for and subscribe to. Only having disposable cash of N1m per quarter but receiving deal offers of N10m will lead to frustration.
Note that it is not just about how much you are investing but how the opportunity is structured that makes it more profitable.
2. That you have patient capital – coming with a short-term mindset will not be useful in real estate planning. Despite the popular opinion that there should be a focus on getting your money out fast, you actually short change yourself by doing that.
Staying in the deal for longer is where the most impressive returns reside by way of compound interest on value appreciation and intermittent dividend payouts.
Now, another thing that you want to be able to do here with your dividends is to put them back into your budget for the next investment. Why this is important is that it helps with building up the cash reserve and increases your equity in the investments. If your dividends pay you 100k per quarter then adding that back every two quarters will give you 200k more on your budget.
3. Know what YOUR end goal is for investing in real estate – what do you want to achieve with real estate investing?
Some people are into this because they want to be able to buy a retirement home in their older years, some want to be able to have an income for life, some want to be able to grow their net worth by being part of a real estate empire. Whatever your reason is, identify it and ensure that you can plan your exit or long-term strategy with it.
Because many people still struggle with thinking of real estate investing in this way, I am able to explain it to them using the concept of crypto & stock investing.
No one ever buys a whole unit of stock or crypto – we are all buying smaller units of them; think the same but with real estate being the asset.
If you think of real estate investing like this, then chances are that you are at an advantage of succeeding with it.
Real estate investing as with the development of properties is a life-long business that requires its investors to think like business people not just investors.
A bonus tip:
“Unless you are a full-time investor or developer, you want to understand that your real estate investments are meant to be passive – so the least amount of work that you need to do the better for you. You have to be able to take your hands off it and focus on your active business. Enjoy the long term investing and look for how to earn more so you can plough more back into other investments”.
You may also download her free ebook on real estate here