Skip to main content

Investing in real estate properties: Successful startup and growth strategies


Visit our website

In general, those who embark on life endeavors with a good strategy have the odds stacked in their favor to succeed. When starting off as a real estate investor (full time or as a side hustle), a good strategy or road map is outlined below:
Stage 1: Startup 
Stage 2: Growth
Stage 3: Financial Freedom

Stage 1: Startup

You can start with your personal savings or with a loan. Note that you need to be careful about starting a business or real estate investment with loans. Discuss with your financial planner/adviser before making the decision to invest a loan on rental property.
There are 3 options for stage 1:
a.  Purchase a piece of land and resell for a profit. Reinvest the original capital and profit. Search for good deals on land/property purchases (buy at a price below current “fair market value”), this way, you make some profit on the day you close-out the real estate purchase.
b.  Purchase a piece of land and build. Sell the house you built and make a profit.  Reinvest the original capital plus the profit.
c.  Buy a real estate property and renovate, then sell for a profit (flipping houses). Reinvest the original capital plus the profit.

Stage 2: Growth

There are 3 phases in the growth stage. In this stage you need to be disciplined and ensure proper due diligence in your investments because you now have more money or capital at your disposal , therefore you are exposed to more real estate investment opportunities, some of which might be risky or bad investments.
Phase 1 - As you keep re-investing your capital plus profit from stage 1, your portfolio becomes larger. Your cue to add rental properties to the mix is when you have enough capital to continue stage 1 strategy (buy, build and sell or house flipping) and still have access to more money/capital to acquire at least one rental property.  A good rental property will in some years generate rental earnings that will equal the total cost of acquiring the building or property (buying or building). It is very important to consider how many years this will be when evaluating the returns on investments (ROI) for any rental property.
Rental ROI = (Total cost of property / yearly rental incomes) 
Tip: A rental ROI of 10 to 13 is good

Phase 2 - Know when to either do major upgrade/renovation or sell (for profit) your rental property /properties. 
-   It is a wise strategy to get a periodic valuation for your property (every few years) then compare it with a market survey of current prices of similar properties in the neighborhood. This is to enable you evaluate the potential for your property to still gain value or if the value growth rate is flat (plateau stage). This way, an informed decision can be made whether to sell the rental property and use the proceeds to develop/buy another rental property with potentials for value appreciation and better returns (consider ROI as explained above). The other option is to do a major renovation of the rental property and make it more structurally strong and modern (more attractive, energy efficient and comfortable). This will cut down future maintenance expenses and insurance cost while you earn better rental rates as compared to newer/modern rental properties in the area.
-    In some cases, the property value may have significantly increased while the rental value did not increase at a comparable rate. Such cases of non-commensurate increase in property value vs. rental value may be due to a saturated or matured neighborhood where there is scarcity of new land for property development, but no improvements in social infrastructure and lower security/comfort due to congestion in the neighborhood. It is wise to sell such rental properties and invest in other areas where land and houses may be a lot cheaper, social infrastructures and security/comfort levels are better and the rental rate is commensurate to property value i.e. better percentage of returns on investment (rental ROI).

Phase 3 – Acquire more rental properties as you gain access to more money/capital. This is where you experience the true meaning and miracle of compounding rental income. Your flow of rental income (passive income) continues to increase.

Stage 3: Financial Freedom

This is the stage where you are generating enough rental income to sustain your full living expenses and have some extra money to save without the need to continue actively working, flipping houses or developing new properties to sell. Note that building or renovating to sell (flipping houses) is considered working to earn income (i.e. active income) because there is a continuous input of significant personal time, efforts and money to generate income. On the other hand owning a rental properly requires negligible personal time and effort to continue generating income. At this stage, the extra savings from passive rental income can be accumulated to continue buying/acquiring more rental properties.

In conclusion, a real estate investor need not be in a hurry to make money and achieve financial freedom, it takes time, consistent efforts, money/capital , discipline and good investment strategies to get there.



Disclaimer
Any views or opinions represented in this blog belong solely to the blog writer/owner and do not represent those of people, institutions or organizations that the writer/owner may or may not be associated with in professional or personal capacity, unless explicitly stated.
Any views or opinions are not intended to malign any religion, ethnic group, club, organization, company, or individual. All content provided on this blog is for informational purposes only. The writer/owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site.
The writer/owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information.
Comments are welcome. However, the blog writer/owner reserves the right to edit or delete any comments submitted to this blog without notice due to:
- Comments deemed to be spam or questionable spam.
- Comments including profanity.
- Comments containing language or concepts that could be deemed offensive.
- Comments containing hate speech, credible threats, or direct attacks on an individual or group.
The blog owner is not responsible for the content in comments.
This blog disclaimer is subject to change at any time.





Comments

Post a Comment

Other interesting posts

Properties in New Developing Areas vs Developed Areas

  Visit Our Website  When considering real estate investments or purchasing a home, buyers often face a critical decision: whether to invest in a property in a new developing area or an established, developed area. Each option comes with its own set of advantages and challenges, and the best choice depends on individual goals, financial capacity, and lifestyle preferences.   Developed areas are typically characterized by well-established infrastructure, mature neighborhoods, and easy access to essential services such as schools, hospitals, shopping centers, and public transportation. These areas are often located closer to city centers, making them attractive to individuals who prioritize convenience and accessibility. Properties in developed communities generally have higher market values, driven by demand and the scarcity of available land. As a result, these areas often offer more stable and predictable returns on investment. However, this stability comes at a cost—pro...
Post a Comment
Read more

Effective Strategies To Increase Your Property's Value

  Visit Our Website  Improving a property to make it more appealing to potential buyers or renters is a sound investment tactic. There are several cost-effective ways to add value to your home, from simple cosmetic updates to more significant renovations.   One of the easiest ways to increase a property's value is by enhancing its curb appeal. Freshening the exterior with a new coat of paint can instantly make the house look more inviting. Additionally, well-maintained landscaping, including neatly trimmed lawns and colorful flowers, can leave a positive first impression. If local regulations allow, consider adding extensions for an extra room, bathroom, garage, or carport, which can significantly boost the property value.   Key areas within the home, such as the kitchen and bathroom, are crucial to potential buyers. Upgrading the kitchen with modern countertops, cabinets, and appliances can be a wise improvement plan. Similarly, renovating the bathroom by replacing ...
Post a Comment
Read more

Establish a Clear Exit Strategy Before Investing in Real Estate

  Visit Our Website  Investing in real estate is one of the most significant financial decisions you will make. Whether purchasing a home for personal use or acquiring an investment property, it is essential to approach the process strategically. A clear, well-defined exit strategy ensures that your investment aligns with your financial objectives and protects your capital over the long term.   Why an Exit Strategy Matters Before finalizing any property purchase, establish a clear exit strategy; this is your plan for how and when you will sell or divest from the asset. An effective exit strategy helps mitigate risk and ensures your investment remains adaptable to changing market conditions. Key questions to consider include: Can the property be sold   easily ?  Properties in prime locations generally offer higher liquidity and  greater  market appeal. How quickly do similar properties sell?  Understanding the average time on the market for compara...
Post a Comment
Read more

Return on Investment (ROI) vs. Property Appreciation

  Visit Our Website  Real estate investment has long been a popular choice for those seeking to grow their wealth. However, real estate investment strategies can differ significantly depending on the investor's goals. Two of the most common metrics used to evaluate the success of a real estate investment are Return on Investment (ROI) and Property Appreciation. While both are crucial for understanding the profitability of real estate, they represent different aspects of investment performance. This article will explore the differences between ROI and property appreciation, how they are calculated, and the factors influencing each.   Return on Investment (ROI) is a measure used to evaluate the efficiency of an investment or compare the efficiency of several different investments. In real estate, ROI specifically measures the return an investor earns on a property relative to the property's cost or total investment cost(down payment, closing cost, or cash).   How to Ca...
Post a Comment
Read more

Take Baby Steps In Real Estate Investment

    Visit Our Website    It is very easy to lose money due to bad investments if one is over-ambitious as a real estate investor. These kinds of bad investments are typically carried out without good knowledge of what to watch out for when buying a property. This inexperience leads to buying properties above fair market price , in the wrong neighborhoods, building the wrong type of house or apartments for a particular neighborhood, or in an area that may not appreciate in a long time. When investing in real estate as an upcoming investor or developer, it is wise to start with a few properties at a time. Observe how these properties will perform, then use the experience in handling subsequent investments. Make sure to observe the property manager and tenants in terms of tenants’ selection, rental payments, property usage, prompt maintenance, and property management. This is one of the issues some landlords face as tenants will not make rental payments as at when due,...
Post a Comment
Read more

Merits and Demerits of Building a House from Scratch

Visit Our Website Building a house from scratch for rental purposes or outright sale has its merits and demerits as compared to renovating an existing building.    Merits You can have an input on the architectural design of the house. You can decide how the external view and the interior of the house should look like. Creating an area with good and easy to move around living space can make the apartment appealing to tenants. You can decide the budget for the project. Based on your estimated selling price for the proposed property, you can decide on the budget you want to put into the investment to give you a reasonable profit margin. You can decide the number of bedrooms for each apartment. Most times with a good survey of the vicinity you will be able to tell what kind of apartment will rent faster and give higher returns. Example the difference between 1-bedroom apartment and 2- bedroom apartment or 2- bedroom apartment and 3- bedroom apartment may not be ...
5 comments
Read more

The Relevance of a High Oversite Concrete/Foundation of a House

Visit Our Website Oversite concrete (often referred to as German floor by the laymen) is a layer of concrete used to seal the earth under the ground floor of a house. Before pegging and digging the foundation of the proposed building. The first thing is to determine how high the oversite concrete of the house should be raised above the natural ground level. Note that there will be many different levels on a sloped land. It is very important to check the topography of the area. More important is the level of the land with respect to the road. If the road is tarred, use it as a reference for determining how high to fill the land when the building is completed for proper grading of the yard for surface drainage. But if the road is not tarred, endeavor to put into consideration how high in the future you think the road will be filled or excavated during construction and use that as a guide or reference. Having a good knowledge of how high the land should be filled to ena...
Post a Comment
Read more

Key Differences Between Return On Investment (ROI) and Property Appreciation

  Visit Our Website  When evaluating real estate investments, two crucial metrics come into play: ROI (Return on Investment) and Property Appreciation. They may be telling us about the profitability of real estate but they differ in various ways. Here are 7 key differences between ROI and property appreciation, along with examples for clarity: 1. Definition - ROI (Return on Investment) refers to the overall gain or loss made on an investment relative to its cost, expressed as a percentage. It considers both rental income and capital gains (property value increase). For example, you purchase a rental property for $200,000, receive $10,000 in annual rent, and sell it two years later for $250,000. Your ROI is calculated based on a total rental income of $20,000 and property appreciation of $50,000.  -Property Appreciation refers to the increase in the value of real estate property over time, typically driven by market trends, demand, and property improvements. For example, i...
Post a Comment
Read more

Real Estate as a Store of Value

Visit Our Website Store of value is a function of an asset that can be saved, retrieved and exchanged at a later time without any risk of losing it and also retains its purchasing power into the future. Wealth is the total of all stores of value monetary and non-monetary assets. The most common store of value in modern viewpoint has been currency, precious metal (Gold, silver etc.) and real estate. The underlying reason for using this storing medium is that it has a better way of managing the risk associated with it. Most people would say money is one of the best ways to store value because of the ease of exchanging it for other goods and services without time wastage, but it can quickly be affected by hyperinflation mostly in developing world. However, real estate is a better means of storing value for investors if the property is strategically located in choice areas, well-built (architecturally and structurally) and free from any form of disaster. A good house will gain ...
8 comments
Read more

Factors To consider Before Buying A Real Estate Property

     Visit Our Website  Investing in real estate needs careful planning and timing of the market if it is for business purposes because you want a good return on investment (ROI). So, factors to consider include but are not limited to market research, financial analysis, and some local factors. The first thing to do is to think about your long-term goals for the property. Are you buying it as an investment, a primary residence, or a vacation home? Your intentions can influence when the right time to buy is for you. If buying for business purposes(rentals or for resell) try to avoid speculating on short-term market fluctuations. Real estate is typically a long-term investment, so focus on the property's long-term potential rather than short-term gains. Research the current real estate market conditions in your preferred area to buy. Look at trends in property prices, inventory levels, and market forecasts. Is it a buyer's market or a seller's market? Seek advice from ...
Post a Comment
Read more