You’re just starting as one of the new lawyers at a firm in Townsville specializing in commercial property and rural conveyancing, land development, and business acquisition, among others. You have a plan. That is why you picked this firm over others that were offering higher compensation packages. You figured that the focus on real estate-related cases and subject matter would give you the best insights on investing in real estate.
You’ve committed at least two years. But part of your bigger plan is to create your investment portfolio. It can be as early as your first year with the firm, or it can be later. You’re still finding your way. What are some of the things that you need to know as a first-time investor?
Here are a few things you need to consider:
An Overview of Real Estate Investing in America
The economic bust of 2008 brought about by the devastating crash of the housing market is now but part of faded history. It is stable again, and the real estate investment trusts industry earned a staggering $213 billion in revenue as of April 2019. The annual growth rate for the past five years is 2.3%, with businesses numbering nearly 8,600.
Low-interest rates are contributing to the upward trend in the industry.
How and Where to Start Your Investing
The goal of real estate investing is to use the money you have today, let it grow, and collect on your profit or returns in the future. If you want to have a successful investment, the total return must be higher than the costs you will incur, which include but are not limited to, taxes, cost of real estate ownership (e.g., utilities and maintenance), and the cost of the risk. Here are more things to take note of:
- Decide on a scheme. You can earn money by betting on real estate appreciation, i.e., you acquire properties, which you think in time will appreciate because, for example, of future developments, like shopping centers and malls. Cash flow income is another way. You buy an apartment or house, manage it, and then rent it out. Base your decision on thorough research and how the market is performing in your area. There are always risks, and your attitude towards it will also dictate how you will invest.
- Be patient. A proposition that comes to your radar might be tempting. But know that you probably have many options to choose from. Take your time, do your research, and understand the market and what’s transpiring in your neighborhood and nearby areas.
- Consider getting REITs. Owning REITs or Real Estate Investment Trust is like owning a real estate property WITHOUT physically possessing a property. What you buy are shares of publicly traded REIT. If you don’t have any resources to purchase a property but want to invest in real estate, this is a good option for you. It offers both liquidity (because it’s much easier to dispose of your shares in the market) and diversity (because you’re not only investing in one building or property but in multiple properties).
- Managing risk. You’re a lawyer, so you know that to manage risks, real estate investment shouldn’t be held under your name. It should be done through a legal partnership or a limited liability company.
You can also consider flipping homes as part of your portfolio or operating ancillary services (e.g., laundromats) in your property. You have many options. But these things should be your focus when investing in real estate.