From the fictional Lex Luthor to the very real Donald Trump, real estate has often been considered a ripe investment opportunity for successful entrepreneurs. But what differentiates a smart real estate investment from one that’s going to turn into a disaster? What tells the best real estate moguls when to buy and when to sell?
Real estate is a long term investment
If you’re planning on investing in real estate because you think you’ll get rich quick, you need to think again. There have been boom times in real estate history, but the current economy is not one of them. In the 1990s, it was fairly easy to buy a property, make very quick improvements, and then flip the property, making a quick and substantial profit. After the housing bubble burst and the recession of the early part of the decade left the economy running sluggishly, real estate has been one of the last areas to rebound. If you’re looking to invest in real estate, doing your research and moving slowly will be to your benefit.
Location is one element of a building you can’t reasonably change
How do we find market problems worth solving? The conception is that business development and product management go hand in hand. An old adage about real estate is to always look for the worst building on the best street to understand the area in which you may be buying. When you are able to buy that building, you get the best chance to build equity, as you’re most likely to be able to improve on your buying price when you go to sell.
If you’re buying the best building on the street, however, you’re going to have a harder time finding ways to improve and build value.
Always have a plan
Whenever you look at a building, you should have a plan on how to use it to turn a profit. Whether that involves turning it into housing, or making improvements that allow you to increase tenancy, or understand what is keeping the lot from moving, and knowing what you can develop in order to move forward. Having a clear understanding of the costs associated with development will help you ensure a clear plan without any surprises.
If you’re not sure where to start with valuing real estate and moving forward, talk to your local Chamber of Commerce and look for a mentor in your area. The Asset Quest team is also always ready to share our knowledge of how to get started in the real estate investment world.