Building Your Real Estate Empire
Property ownership is probably the most common form of real estate investing, and many individuals are doing it already. Your primary residences when held for the long-term can result in substantial capital appreciation, especially if you bought at the right time.
Why invest in Real Estate:
- Financial freedom
- Cash Flow
- Capital Appreciation
- Stable
The most common investment strategy is to buy a rental property either a Condo/Apt., or an individual house. The owning of rental properties and becoming a landlord and collect rent.
Let’s examine other ways of owing and benefiting from real estate financially.
- Land Development/Raw Land
- Multifamily Homes – Duplex, Triplex & Quads
- Apartment Buildings
- Commercial Real Estate
- Fix and Flip
- Infill’s
- Wholesaling
I am going to focus on Land Development/Raw Land in this article and will address the rest in my upcoming articles.
Land Development/Raw Land:
Land investment can be very rewarding especially if you purchase in the path of development and change the use and sell to a developer, develop yourself or joint venture with a developer.
This can be an extremely rewarding investment strategy but it takes time and expertise. It’s important that you do your due diligence to see what the current zoning is and if it can be changed to what you require.
In land development they are four steps that you must do:
- Acquisition….. Careful research and evaluation has to be done to each property to make sure you are not over paying for the land and that you can get the required zoning to do your development. There is lots of work that is required to determine if the land is feasible for the development. You need to enter into a contract that allows you time to do your due diligence to see if the parcel of land is feasible for what you intended. You can either use an option contract or an agreement of sale with conditions that will protect your downside in the event the land does not meet your requirements. The minimum time required is 12 months to do proper feasibility study, which overlaps the three other points, financing, planning and exit.
- Financing… Most banks and financial institution won’t lend to acquire land. You must look at other financing options:
- Personal funds (not the best use of your money better “OPM” Other People Money.
- Seller Financing
- Joint Venture with the land owner, they will have a better return.
- Private Mortgages.
- Group Mortgages, this is where a group of private lender come together to fund various portions of a single mortgage to you the borrower.
- Shared Appreciated Mortgage, this is attractive to most lenders especially if you can demonstrate the capital appreciation in the development. This mortgage where the lender or a group of lenders place a traditional mortgage and in addition get a share in the capital appreciation.
- Planning/Managing the planning, design and approval process. It depends on your exit strategy will determine where you stop in this process. If you are going to take the land through the development curve to end product, homes, apartments or commercial spaces then you will take it to the subdivision and site plan approvals. However you could just rezone the land and sell to a developer or get the subdivision and site plan approved and sell to builders. Most developers and builders rely on land bankers who gets the zoning and master plan in place.
- Exit….Once you identify the parcel of land and have your preliminary meetings with the town/city planners to see if you can get your desired use, it is very important to start thinking about how you will exit. How will you get the investors and your money out? If you are getting the land ready to sell to a developer or builder, you should start having conversation with those developers or builders either directly or through a realtor to see if they have a demand for land to build and develop. If you are going to take it to finish product consult with realtors in the area to see the demand and start taking reservation and get your pre-sale as soon as you have full approvals.
Interesting facts:
- 1/4th of Forbes 400 richest people in America created their wealth through real-estate.
- 90% of the fortune 400 retains their wealth through real-estate investments.
- Nearly "all" millionaires earn their first million through their own business or "real estate investments'
INVESTING ON SOLID GROUND
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