ZipBrands posted an update 2 weeks, 3 days ago
Preparing For a Real Estate Investment Business
Before beginning a career as a full-time real estate investor, you must decide how you will finance your business while maintaining your household. Generally speaking, anyone planning on taking the route of self employment should prepare themselves by saving at least six months worth of living expenses.
Because you will not need a brick and mortar location to run your business, your business overhead should be relatively low. You may need to invest in a good computer and all-in-one printer/fax/copier/scanner if you don’t already have that equipment. Consider getting an e-fax account as well. You will need a business phone line or cell phone. If you choose to use a cell phone, remember that you are running a business; always answer the phone in a professional manner and your outgoing message should also be professional.
Your business budget should provide for payments for office supplies, telephones, legal and accounting fees, business credit cards, and marketing. When you begin your real estate investing business, plan to spend anywhere from $1500-$3000 every 60 days to market your business.
Whether you are creating a personal budget or a business budget, account for both fixed and variable expenses. Fixed expenses are those which are the same month after month, such as rent or mortgage payments. Variable expenses change every month. These include groceries, gasoline, entertainment, and eating out. If you find that you are consistently over budget each month, reduce your variable expenses.
As your business grows you may decide to hire an assistant. Remember, if you hire someone as an employee, you have to pay payroll and unemployment taxes which can greatly impact your bottom line. A more cost-effective route is to hire a virtual assistant who will work as an independent contractor rather than an employee.
Before placing a property under contract, you need to run the numbers. If you plan to flip a property immediately, you must be able to calculate repair costs and after repair value and arrive at a sales price that will make you some money, but leaves enough room for an investor to profit as well.
If you plan to buy a property and repair or rehab it to either hold or sell, not only will you have to estimate repair cost and after repair value, you’ll have to budget for the repairs. A good rule of thumb in estimating repairs is to always estimate high. By padding your repair budget, you insulate yourself from cost overruns which could turn a sweet deal into a big, fat, money-losing dud.
Another way to control repair costs, especially if you are just starting out, is to stay away from older properties because they tend to have more deferred maintenance issues than newer properties. Focus on properties that are no more than ten years old.
When dealing with contractors, get everything in writing. That includes the estimate and the final contract. Both should be written on a pre-printed form that contains the contractors name, address, and phone number. The final contract should be signed by both you and the contractor and should contain a detailed description of the work to be done, materials to be used, draw dates, and how change orders will be handled and funded. The contract should also indicate whether you or the contractor will be responsible for pulling the necessary permits and obtaining builder’s risk insurance.
Never release more than one-third of the contract price to the contractor at the beginning of the project. One-third should be more than enough for the contractor to get started, even when the project involves custom work.
Andrew Thomas is Managing Director and Story Teller at ZipBrands He has studied the Real Estate Business for years. He enjoys connecting with people, keeping updated with latest in the field of Real Estate and Business etc. He has also discovered great shortcuts that can help investors make better decisions when it comes to buying and selling. His work across multiple disciplines broadly addresses narratives of human experience. You can follow him on facebook also.