Today’s economy around the world faces tough issues due to the pandemic. Companies are laying off workers as demand for their services slide; some are shuttering their doors forever. Other businesses hang on waiting for the end of the pandemic or the next inflow of cash from their governments. The economic downturn creates a downward spiral as those facing layoffs, reduced hours, and dwindling profits spend less forcing their economic woes on ever-widening circles of businesses. Maybe you think you can start a new business either as a side gig or as a way forward in your journey. Well, real estate investing might be just what you’re looking for.
Some businesses come and go, following the ebbs and flows of consumer tastes. Other businesses stick around and stand the test of time. If you thought about how to start a new business in the pandemic, the real estate business might be just what the accountant ordered.
Start a new business
Real estate never goes out of fashion and, with the exception of the financial crisis in 2008-2010, real estate outperforms many other types of business. Real estate has the advantage of flexibility, offering a means to make money from your side hustle without investing much in the way of time or money.
Here are some opportunities you can use to propel yourself into a real estate gig that may, someday, turn into a full-time business opportunity.
- A virtual assistant to aid in appointment setting, etc.
- Real estate bloggers earn money through advertising and affiliate marketing
- Management of an Airbnb or housing complex, which may offer free housing
- Wholesalers who make a commission by connecting buyers and sellers
- Real estate agents who work flexible hours
- Flippers who buy distressed homes and do short-term upgrades to earn high profits from the resale
Why real estate makes sense when you start a new business
Everybody needs a home to live in; and that’s been true since the dawn of humanity. People will always need someplace to live and businesses always need a location. And, over time, people and businesses need bigger locations or need to downsize. As a real estate professional, you’re there to make money from each purchase or sale.
For that reason, real estate is a business that, no matter the state of the economy, is always a reliable choice for those looking to make profits long term. Of course, there’s more to it than simply investing in real estate. You must carefully research your investment before making a purchase and plan for your new business just as with any other business you start. Here is how investing in real estate makes a great side hustle and may be the best business decision of your life.
Playing the long game
If you need to make a quick buck to pay your own mortgage or put food on the table, real estate investments aren’t the right decision if you choose to start a new business. Making money from real estate takes time and money before you see much in the way of profits, since real estate appreciation doesn’t happen overnight. You will likely wait for profits for at least two years.
If you choose house-flipping as your means to start a new business, you must buy the right property at the right price, then work strategically to upgrade and renovate the property so it’s worth substantially more than you paid for the property. Flipping offers significant profits in a relatively short period of weeks or a few months, but it’s not for everyone.
- You need intimate knowledge of housing prices and the ability to estimate which renovations add the most to your ultimate selling price.
- A good head for numbers and expertise to estimate the costs involved in renovations ahead of time
- Flipping is capital intensive as many properties require cash payments or a large line of credit
- To work, you need skills to do many of the renovations yourself or have a great network of reasonably priced subcontractors
- Luck. Anyone who ever took on a remodeling project knows you often run into unexpected and expensive surprises once you start a project
Start a new business renting housing
Whether you buy 1 unit or an entire apartment complex, a rental business makes sense if you take the long view. But, becoming a landlord has its pitfalls as you have a sizable financial commitment in just making the initial purchase. Add to that the maintenance costs and the inevitable write-offs when tenants don’t pay their rent. Plus, the headache of tenant complaints and conflict.
Of course, tax law may subsidize your investment, making this type of new business worthwhile.
How to invest in real estate
Here are some things to consider and research in order to invest in real estate without losing your shirt.
- The location of your investment. One of the key factors when buying property is location. If a location is up and coming, it might mean that the schools there are increasingly well regarded, the local businesses are thriving and the transportation connections are good. This means that more people want to live in the area, making these properties easier to rent or sell.
- The amount of work required. If you buy a property that is just bare-bones, you face high renovation costs and likely surprises, such as an uneven foundation or serious plumbing problems. These issues delay your ability to sell or rent the property as well as increase the ultimate price you need to break even.
- Mortgage and tax payments. Factor in the debt service required as well as the tax incentives offered by local and national governments. Sometimes, cities offer great tax incentives to revitalize property that’s fallen on hard times.
- Risk. Anytime you start a new business there’s risk. Real estate is no exception but the high buy-in needed to enter the business inherently increases the risk.
In addition, you should consider that your new business requires planning and marketing, just like any other business. This includes investing in real estate investor website design, paying off any debt which affects your credit, and paying attention to the community you where you make your investment. With effective planning and capital, as well as close attention to marketing your business, real estate might be a great side hustle.
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