17 Sep The Anatomy of a Great Real Estate Business
When I started investing in real estate, I just had a few properties that I rented out. I wasn’t aggressive with my investing yet, but a mentor of mine encouraged me to start taking real estate more seriously. As I did, I built a large portfolio and created a whole real estate business.
I have learned a lot of things about real estate along the way. Some came from mentors and some came from mistakes I have made. Today, I want to share with you what you need to know in order to build a working real estate business.
How to Build a Real Estate Business in 5 Steps
1. Set Up an LLC
This is, perhaps, the most important step, which is why it is the first thing I am telling you about. LLC stands for “limited liability company”, and there are quite a few reasons I like to set up my real estate business as an LLC. Primarily, it protects you from any “liabilities” that may arise.
For example, say you purchase a property and it had tax liens on it that you didn’t know about. If they come after you for that money, they aren’t actually coming after you and all your personal money. They can only penetrate what you have inside the LLC pertaining to that specific property.
2. Utilize Creative Financing
Many people think there is only one way to raise money for a down payment on a house. They work hard, save their money and apply for a loan at a bank. While that is a great way to do it, especially for buying your first house, there are other options.
You can have a partner in real estate that helps put up the money, but I encourage you to also look at other loan options. Visit a mortgage broker and a mortgage banker. In fact, I encourage my students to have a few brokers they approach when looking for a loan. There are so many loan products out there, you just have to work with someone who will help you find them.
3. Don’t Rule Out…
I have seen many people lose out on big profits in real estate because they won’t look at purchasing vacation properties, moderate-income neighborhoods, or even section 8 housing. These “specialty” areas can be daunting at first, but they generate generous cash flow.
Section 8 rent, for example, is guaranteed by the government, so you don’t ever have to worry about a tenant missing rent. Vacation properties are increasingly popular now, especially with the rise of Airbnb, and websites of the like. Moderate-income neighborhoods are where I have found some of the best cash flow in all of my experience, so don’t rule these areas out when building your real estate business.
4. Have a Team
Along with setting up an LLC, this is one of the most important parts of your real estate business. You have to have a team in place, period, especially when you get to building a larger portfolio.
Some key members of your team are: a property manager who can handle all the 3 a.m. emergency calls, a real estate agent who is an investor or currently works with other investors, two to three mortgage brokers, a great real estate lawyer, and a very detailed accountant.
5. Stick to the Formula
Finally, this step helps protect you from running out of cash. I have a formula that I teach all my students and clients to ensure that all your properties are yielding a cash flow.
Typically, you want 1-1.5% back in rent per month. There are other formulas when purchasing a house, fixing up a property and so on, but if you’re making 1-1.5% in rent, you are doing good.
There is so much more I could teach you about real estate, so I’m inviting you to my workshop in October! You will learn everything from getting started to scaling your existing real estate business. There are only 2 tickets left, so click here to find out more and here to save your spot!