As we emerge from one of the most severe economic downturns in recent history, many individuals are considering
investment opportunities in real estate. Favorable mortgage rates, coupled with depressed market values in many regions,
may present a good opportunity for pursuing a real estate rental income and long-term growth investment strategy. The first
step is to determine if this type of investment strategy is right for you. If so, consider the benefits of launching your
investment venture through a partnering strategy.
Right For You?
Investing in residential real estate with the objective to generate income involves buying properties that will generate
a
positive annual cash flow. Income is generated primarily through rent from your tenants. To determine if this type of
strategy is right for you, it's necessary to consider personal as well as market factors.
Buying a residential property is a lot different from other types of investments, such as investing in the stock market.
Buying and renting properties will require a significant time commitment. As a real estate investor you will need to spend
time analyzing properties and market fundamentals, visiting properties, meeting with mortgage brokers, interviewing tenant
candidates, etc. It will also require ongoing interaction with your tenants, at potentially inconvenient times and
involving potentially stressful situations. Problems requiring your attention may occur during the weekend or while
you'reon vacation. Beyond time commitment, you should also be prepared for a financial commitment beyond your initial
investment (ie, the unexpected boiler failure or extended tenant vacancy). Make sure you are willing to make this type of
personal and financial commitment, in order to achieve the potential rewards uniquely associated with real estate investing.
The real estate market moves in a fairly predictable pattern. Repeating downturns and upturns are normal and necessary.
The six phases of the real estate cycle are:
- Demand Rises
- Construction Increases
- Demand Slows
- Supply Exceeds Demand
- Construction Decreases
- Demand Hits Low Point
While the real estate cycle is predictable, the length and severity of each phase will vary from cycle to cycle. Many
factors influence the transition from phase to phase, including job market changes, interest rates, population changes and
construction activity. As we know, the recent economic downturn has displayed a particularly severe phase 4 and 5 in many
areas.
As a real estate investor, your first step should be to focus on a region where the real estate cycle is currently
favorable to investing in residential rental properties, given your financial resources. It's important to remember real
estate cycles and market factors are always local. Ignore national headlines and instead focus on the local market
conditions.
Partnering for Success
Once you determine that you're ready to make the personal and financial commitment to investing in a residential
property, consider a partnering strategy to get started. Partnering on a real estate investment venture offers many
potential benefits:
- Pooled capital resources will reduce your required cash investment
- Leverage experience; a great way to get started is to partner with someone who already has a property portfolio
- Access to favorable markets; partner with someone in a target investment market who can offer insight to the
market and manage properties
- Mitigate risk; managing through unexpected events is easier with the resources of multiple partners (for example, longer
than expected apartment vacancy requiring partners to cover expenses).
If you decide to pursue a real estate investment partnering approach, ibovo.com provides leading-edge features to help you
locate potential partners, build a team and effectively work together with your partners on your real estate venture. For
example, Jane lives in Los Angeles, CA but is interested in investing in Miami, FL. So Jane sets up a team based in Miami,
FL and creates 2 team roles, representing partners she is seeking. One role is for an investor that can be located anywhere
in the world and the other role is for property manager partner with a requirement for the candidate to be located in the
same city and to have significant property management experience. Jane then uses Member Automatch to view a list of
candidates that are relevent to each of the team roles. Jane uses ibovo tools such as ibovo Xchange, ibovo Chat and ibovo
Web Conference to interact with candidates and eventually selects one candidate for each role.
After forming a real estate venture team, team members are able to effectively collborate using ibovo Workspace and
interact in real-time on ibovo Web Conference. These tools can be used to work together effectively on all aspects of
venture planning and execution, such as:
- Discuss business and tax structure options
(Web Conference - Video Conferencing, VoIP,
Teleconferencing)
- Business Plan formation
(Team Workspace - Wiki document sharing and collaboration)
- Legal filings, tax filings, banking records
(Team Workspace - file sharing)
- Real Estate Property Analysis Worksheets
(Team Workspace - Wiki document sharing and
collaboration)
- Real Estate Property Reviews
(Web Conference - desktop sharing to visually evaluate properties and
browser candidate properties on the Web)
- Property Financing Options Discussions
(Web Conference - Video Conferencing, VOIP and
Teleconferencing)
- Tenant Contracts/Leases
(Team Workspace - file sharing)
- Brainstorm Investment Opportunities or Ideas
(Team Workspace - Team Blog)
Use ibovo to help make your real estate investment idea a reality. Learn more about ibovo standard and premium features, and feel free to contact us with any questions or suggestions.
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