What You Should Know Before Venturing into Real Estate | Business Town

What You Should Know Before Venturing into Real Estate

Entrepreneurs and savvy investors are always on the lookout for a lucrative new business venture, and for years, many have found great success in the real estate sector. If you’re considering a foray into the world of real estate, take the following facets into consideration as you think about how to start this business.

It Can Be a Safer Bet than Stocks

While stocks can mean losing your entire investment in one single downturn of the economy, real estate investments generally fare better over time. As land is a limited resource, landowners will find their purchase appreciating gradually or exponentially (depending on location) over time. Even if the economy does slow down or take a turn for the worst, over the course of a lifetime, your real estate value will continue to appreciate.

It’s a Great Way to Diversify an Investment Portfolio

If you want to minimize risk in your investment options, it’s vital to work on ways to diversify your portfolio. This tends to be a driving factor behind entrepreneurial decisions to get involved in real estate.

Diversifying your portfolio makes you less susceptible to volatile markets and can better protect your assets. Should stocks plummet one day, you’ll have a solid and steady real estate investment to fall back on. Real estate investments can help you vary your assets and expand your diverse holdings.

The Startup and Maintenance Costs are Vast

It will be a long time before you see any sort of significant return on your real estate investment, so don’t expect immediate profit turnaround. You’ll need to come up with the down payment for the mortgage, have a steady flow of income to fall back on for repairs and maintenance, and be prepared to face vacancies that deplete your monthly real estate income on occasion.

Real Estate Success Requires Education

If you have no prior knowledge of the real estate sector, rethink your decision. It’s essential to have or foster an in-depth knowledge of the ins and outs of the industry to make your investment viably lucrative. Attend real estate seminars, read literature, and most importantly, speak with those who have gone before you; learn from their successes and failures alike.

There are Tax Benefits

When you make an investment in real estate, you might be investing in tax breaks. Depending on whether you’re classified as an active investor or a real estate professional, you’ll find a bevy of tax breaks, deductions, and tax-free income that could change your financial horizon.

It Takes Time to Find the Right Property

Once you’ve made a commitment to real estate investing, it’s understandable that you might be champing at the bit to make your first purchase and get started on the road to success, but rushing the process can come back to bite you.

Don’t fall prey to the first property you take a look at; take your time, and do thorough analyses of each and every property you take in. Once you have bevy of options, begin narrowing down through the criteria you’ve deemed essential.

While it’s important to take your time when purchasing your first property, there’s also plenty of reason to avoid prolonging the process. Waiting for the perfect dream home might see you 10 years down the road with no property to your name—and higher prices to contend with.

If You’re Planning on Renting Out Your Property

If you plan on renting out your real estate investment, it’s vital to do everything you can to safeguard your property.

Screen every tenant extensively with a detailed service like Transunion SmartMove, make sure you go through your lease provision by provision with a trusted and experienced legal counsel, and install security measures on the property itself.

It’s also important to access the right insurance that will cover you in case the unthinkable happens. Many landlords are also requiring their renters to provide proof of renter’s insurance like that from Progressive Insurance, as landlords can end up paying high deductibles on their own plans without it.

Bob Adams is a serial entrepreneur and founder of BusinessTown.com.