Creating Your Own Real Estate Business
We cannot neglect the fact that real estate is one of the most booming industries in the country. In fact, most of the wealthiest people get their fortune through real estate. So most probably you might ask these questions:
“How can I create wealth in real estate?”
“Can it apply to me even if I am a small time player and do not have much money on my pocket?”
In this article, I want to show you how you can create wealth in real estate even if you have limited resources to start with or even as a beginner on such industry.
Here is how:
Get the property financed
Financing a property will allow you to pay the total price divided over a period of time, in short, amortization. You don’t need to pay the whole amount which most of us thought how it should be, but definitely a big NO! Most property developers will just ask you to pay the down payment of 20% of the total price, and then the remaining 80% will be applied for financing. Even the 20% down payment, some developers will give you 24 to 36 months of zero interest deferred payments or divided payments which makes it very light and affordable. Here is an advantage about that, because it is on divided payments, it will allow you not just to acquire one property but more.
“So Jaz, let say I will buy more properties. How will I be able to pay all of them?”
Good thing that you asked me about that but first allow me give you more information about this one. In most cases, financing institutions are eager to lend you money to acquire a real estate property but of course you must pass their qualification. Different banks have different qualifications. Most likely they will base it in your income and bank records. So it is not an assurance that if you have extra money to pay the monthly amortization of other properties, they will allow you to finance your other properties. But if they do so, here is how you can manage to pay them all.
Put it on rent
This is one of the best things about having a real estate property, is that you can put it in rental. This will allow you to enjoy the certainty of a monthly passive income. But here is a tip, buy properties that has a high potential or has a great demand for rental and not just because you like the design or the color of the wall. I don’t want to sound so harsh; of course you can be subjective on that. But a wise thought in real estate investing, it is all about “location, location, and location”, because this will give you an idea of the rental rate of your property. It is good to make sure that there is no oversupply of the same type of property in that same area because the law of supply and demand will dictate the rental rate and the occupancy rate of your property. Invest in a property that has a high demand, but scarce or hard to find in that area.
“But Jaz, still does not answer my question.”
Relax and hold your horses, I am going there. This time I want to introduce you to next thing you need to understand.
Understanding Cash Flow
This is the secret which is not really the secret because most likely you have heard this one especially if you are a fan of Robert Kiyosaki. Here is how you can pay your monthly amortization and I want you to take note of it. If you are thorough enough in selecting the properties you want to acquire, there is a huge chance to have properties where you can earn a rental income that is greater than your monthly amortization. Furthermore, the net difference will be the money you can keep and use or re-invest.
For example, let say your monthly amortization for a single property is 22,000 pesos and because you are tho-“rough” enough, I mean thorough enough in selecting the property, you are able to rent it out for 30,000 pesos. Let’s do the math:
30,000php-22,000php=8,000php
To make it more realistic, let us add overheads of 10% of the rental price which is 3,000php. So your total net income for a single property is 5,000php
8,000php-3,000php=5,000php (net income)
Not bad right??? You were able to own a property almost for free. It becomes a self-liquidating asset. You get extra cash to return the down payment you spent. Now, does that answer your question? Definitely, yes!
Widening Your Perspective
Now, I want to take you further and widen your perspective. What if you own not just one property, then you applied the things you have read above? Let say you have three properties: multiply it with the net income of your single property; that will be 15,000php of additional income and take note that it is a PASSIVE INCOME. You did not work 8 hours a day just to have that and yet at the end of the month it goes to your pocket.
Now, let say you have finished paying the monthly amortization, so the entire rental amount is yours to keep and spend. That is about 90,000php of additional income for you, already good enough that you can retire early. But of course I won’t suggest that, I am just saying you can retire early. By that additional amount of money, you can re-invest for more and create more wealth for you and your love ones, right?
“Yah’, you are definitely right. But Jaz, I don’t have the knowledge on how to select properties and I don’t know how to market my property for rental.”
Well, there are two ways you can address that. You can go study, spend time on research and create a system on how to manage your property or you can ask the services of professionals on this matter. This is the part where real estate brokers like me can help you the most.
Final Thoughts
It is now your time to take action on all the things you just have read. I want you to begin to create your own real estate business. I know there are a lot more ways on how you can create wealth in real estate. What matters most is that you start on something now and achieve that financial freedom that you dream through real estate investing.