Real Estate investment is one of the most exciting ways to improve your finances if done right. That’s because properties appreciate with time. What’s more, it is a lifetime asset with low-risk and many ways to get a return on investment. Yet, sometimes we are scared of the challenges that come with the investment. Investing in real estate with trusted people can be the answer. But how exactly does it work?
How To Make Money in Real Estate With Trusted People
The process of pooling financial resources with a group of people to actively invest in real estate; comes with fast returns both financially and morally. Although, it is absolutely necessary to set up a due diligence process; to avoid all the pitfalls that come with doing business with friends, family, or relatives.
How exactly does it work?
1. Set objectives by defining the scope of the project.
Remember, you are building a company, thus, do your homework. Work on a business plan, familiarize yourself with the industry, and connect with industry key players. At this exploration stage, be open-minded and flexible. The more you talk to people the more your initial execution can shift. Once everything is set you can move on to the next step. You do not need a perfect business plan.
2. Communicate your idea to your immediate environment.
Share the idea with the potential target audience you want to include in the venture. Then, make a list of all those expressing a strong interest in joining the journey. Finally, set your limit number of people and amount to raise for a start.
3. Vetting, vetting, and vetting.
This is the most critical stage. Any mistakes here and you can regret it for life. The key terms here are Trust and business, not feelings and family. Don’t hesitate to exclude any of your friends, relatives, or family members that have issues with money. Take your time and do this right. Additionally, don’t be afraid to hire a professional firm to help out with the vetting process.
4. Set up a structure & hierarchy of responsibilities.
Evidently, make sure everybody understands their responsibilities at a granular level. Definitely, print that out and distribute. Further, you can involve a lawyer or a CPA in the process. Some people will love to play an active role but some will just want to see their bank account growing.
5. Choose a reliable investment partner: Expert Subject Matter
Choosing a person that has the experience and knowledge of the industry is a critical component. This will help you avoid all the pitfalls of the industry. In addition, to helping you navigate through all the paperwork, and anticipate future trends; the partner will bring serenity and credibility to the project.
What are the advantages?
- The amount of money raised can set you guys off for a good start.
- The amount raised can help target really good locations. Location is key in real estate investment.
- Bigger leverage capacity
- Risk mitigation by leveraging the power of the community
- Provide an incredible chance for everyone to become a successful real estate investor.
The math: How To Invest & Make Money in Real Estate With Trusted People
The case: You want to buy a new modern condo apartment (2 baths 4 bedrooms) around Boston and turn it into a roommate rental for students. In a relatively good neighborhood. Also, we will use a conservative approach for revenue and cost.
Cost:
- Average purchasing cost: $600k depending on the neighborhood
Revenue:
- Rent/monthly per room: $900
- Total annual: $43,200
Leverage: Home-Equity appreciation will generate more cash for different projects. You can also leverage your pool contribution to get more money.
Raising $600k is not easy. But, with a pool of 10 trusted friends and relatives. Each person’s contribution will be $60000. Plus, the more people you have the better and the opportunities will be limitless.
