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When first starting your real estate business, it is okay to have questions. In fact, the best investors become successful because they constantly ask questions in order to keep themselves educated and up to date on the latest trends and technologies.
Henry Ford – one of the world’s best entrepreneurs – was attributed to saying, “If you always do what you’ve always done, you will always get what you’ve always got.” Keeping Ford’s quote in mind, ponder this: if you never ask questions, you will never improve; and if you never improve, you will never get ahead of your competition. So before jumping into the real estate investing field, familiarize yourself with these real estate FAQ’s:
How Do I Finance My First Real Estate Deal?
There are a number of options when it comes to financing your first real estate deal. You can always choose a conventional course of action by acquiring a loan from a traditional lender, i.e. big banking institutions. However, you can always opt for a private or hard money lender. Private lenders are less strict in regards to their loan requirements and therefore typically charge higher interest rates.
Wholesaling is another viable option for investors who are just getting started because it requires no down payment or any of the investor’s personal capital. More often than not, new investors save up the profits they earn from wholesaling to use as a down payment on a rehab or buy and hold property.
What Does ARV Mean?
A property’s ARV refers to its After Repair Value. Learning how to accurately calculate a property’s ARV is a skill that even the best investors still strive to perfect. In order to determine whether or not a specific property is a good deal, investors must first, keep in mind the price of the property; second, be able to inspect the property and estimate the cost of repairs; and ultimately, analyze the numbers to verify whether or not the ARV will be greater than the initial cost of the property plus the repairs. If your calculated ARV is not at least 10 percent higher than the property plus repairs, it is likely that your profits will be minimal.
What Is The Best Exit Strategy For Me?
The first step an individual must take after making the decision to leave his or her nine to five job in order to become a real estate entrepreneur, is what exit strategy to focus on. There are three basic exit strategies investors can choose to concentrate on, which include: wholesaling, rehabbing, and renting. Each has its owns benefits and disadvantages and is ultimately contingent upon an individual’s goals and preferences. For those looking to make cash fast, wholesaling is the ideal exit strategy as investors have the ability to close their deal in as little as two days. One of the most popular exit strategies, rehabbing, is perfect for those with an eye for design and the propensity for getting their hands dirty. If building long term wealth is your utmost objective, consider adding rental properties to your portfolio.
How Should I Structure My Real Estate Investing Company?
The most common way to structure a real estate business is by forming an LLC (limited liability company). However, individuals can also opt for an S Corp or Sole Proprietorship. LLC’s are most universal in the real estate investing industry because it is a separate and distinct legal entity. Meaning that an LLC can obtain a tax identification number, open a bank account and do business, all under its own name. The primary advantage of an LLC is that its owners, known as members, have ‘limited liability,’ which signifies that , under most circumstances, they are not personally liable for the debts and liabilities of the LLC.
Are There Any Tax Benefits That Come With Investing In Real Estate?
The tax benefits that come with investing in real estate are endless. Becoming a rental property owner however, is arguably the easiest way to receive these benefits; but certainly not the only way. When you rent a property, you can deduct a number of expenses including, but not limited to, depreciation, repairs, interest and taxes that relate to the common property.
Real estate investing has the ability to turn employees into entrepreneurs, but not without dedication, hard work, and perseverance. Study these questions and you’ll be well on your way to success.