Investing in real estate is quite a risky venture if you do not have the skills of identifying great locations and properties. As a Real Estate Lawyer, I’ve seen some powerful investors who invest in real estate and fund the investment personally. This is a very brave decision to take, but the powerful investors are relatively less prone to risks as they have a lot going on in their lives as well. On the other hand, investors who have limited funds will often face such decisions and have fears of failure.
Worst Case Scenario
The worst thing that can happen while investing in real estate is that you invest in a certain property and it fails to gain value, in case you are looking to sell it. You will eventually have to sell it at a price that is lower or similar to the one you paid, but you will eventually make a loss due to existence of costs attached to buying. Another thing that can happen is that the property might lose value over time due to massive changes in the location. Such a scenario may leave you with no money at all.
An Alternate Way To Success
In order to gain success in this investment business, the 3 F to success approach can be taken.
- Find it: The first F to success refers to the finding of capital. If you want to invest in great properties, you will require additional capital and you will face difficulties in funding it. The best way is to find some of the best real estate and make a business plan. You will also have to look for potential investors that are willing to pitch in, and they will be convinced if you come up with a creative and attractive business plan.
- Fund it: Once you arrange the capital, invest in the real estate. You can use the capital to pay out the cost of purchasing and other property related costs.
- Farm it: At this stage, you have already acquired the capital and have invested it in a great venture. This is the time to maintain the property. Make sure you use the best ways to create money from it as you will require the inflows to pay off the investment you took from third parties, unless you managed to get a deal that was related to a profit sharing ratio, which should depend totally on your strategy.