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Property Investment as a Business: How to Plan and Start

Updated on October 1, 2010
Photo: Drumaboy
Photo: Drumaboy

Property Investment: a Business

If you are considering investing in property one of the key concepts to remember is that you are in fact going into business. Buying property is not the same as buying shares and putting them in the top drawer. Property is a much more active investment, and even if you employ professional property managers and maintenance people you still need to consider your property investment as a business. Your clients are your tenants and your stock is your rental properties. Any small business book will tell you that if you fail to plan you plan to fail. You need to start your property investment career not hanging out at Open Homes and Real Estate offices but with a business plan.

Your Business Plan

What are your aims with your property business? A lot of people, having decided that property is for them, jump into checking out the local "For Sale" lists on websites, newspapers and property magazines. That's not a good place to start. Instead you have to decide what you want out of your new business. Any good business starts with a business plan. What is your goal: do you wish to create an income stream for retirement? do you want to acquire an asset to live in or to sell? Do you want to access tax benefits? A good goal is a SMART goal that is:

Specific

Measurable

Achievable

Realistic

Time-bound.

Covent Garden, London Photo:18percentgrey
Covent Garden, London Photo:18percentgrey

So starting with an idea - I would like to invest in property, Go through the exercise: Specific: what type of property, apartments, houses, are you looking for captial gains, rental returns both? Who will you know when you have achieved your goals: will you measure your rental returns, your capital gains, how? Is the plan achievable - can afford the repayments, without risking your current lifestyle? What happens if you loose your job, get sick - have you got the appropriate insurances in place. What is your time frame? When do you want your plan implemented by, in 5 years, 10, 20? Is that realistic, achievable?

The whole process is circular - you may want to start at the end - you may want a $X million of property in Y years - but if this will require a capital gain twice the average of the last 10 years, and require you to commit 50% of your present income? Won't work start again, good plans take more than one iteration - even if you settle on a plan in shouldn't be a static document gathering dust in your bottom drawer. Instead review it at least yearly if not quarterly - is it still working - has the property market changed? Has your family circumstances changed?

Create your team.

Although you are going into business that probably won't have employees you certainly need some professionals to be on your team. Try to develop relationships with professionals that you can relate to and who, most importantly understand your property goals. Professionals you should look at developing relationships with include: accountant, lawyer, property manager, mortgage broker, maintenance experts, real estate agents.

Now Implement your Plan

Although many get into property investment without thinking through their plan, others get caught up in planning and suffer "analysis paralysis" - always planning but failing to act. Worried that the best returns are already gone and they are too late into the market to profit. There is some truth in old real estate staying "now is the best time to buy" - but they would say that wouldn't they!

However you now have a plan you know which direction you are heading - its easy to focus on what you want: if you aim to purchase student accommodation you know which suburbs to buy in. if you want to buy a property and renovate then only look for "renovator's delights". It doesn't make it straightforward but at least you have a plan to work to.

Disclaimer

I am not an accountant, mortgage broker, real estate agent or lawyer. I am however a New Zealander who has invested in NZ property for over 5 years and currently own, along with my partner, in excess of NZ$2 million of residential property, over 8 houses. What's your experience in property investment? What is your plan? Please leave me a comment - I'd love to hear from you.

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    • aesta1 profile image

      Mary Norton 3 years ago from Ontario, Canada

      If you fail to plan, you plan to fail. Words of wisdom we all know but often disregard. We have invested in real estate and were happy we did it.

    • profile image

      nasir 4 years ago

      it is very useful pages so I gain so much experience and information through your these pages but i am interested to run such like business but i have financial assistance so i am thing that I should start as agent if you have any other suggestion please send me direction i shall be thank full to you

    • SoaresJCSL profile image

      SoaresJCSL 5 years ago

      Excellent Hub with useful info! Voted up.

    • AllSuretyBonds profile image

      AllSuretyBonds 7 years ago

      Great Hub. I have heard that investing in real estate now is very smart because of the drop in pricing??

    • justmakingmoney profile image

      justmakingmoney 7 years ago from The Pearl of the Orient

      Hi Lissie, your disclaimer only proves that the real estate business can be for anybody who has keen interest in making money in real estate. I myself has been into it since mid-1997.

      And in most of my deals, I don't spend much of my resources because I'm more into foreclosures, or pre-foreclosures. I rehab them a bit and re-sell, I usually have a short list of interested buyers before I sign up for the acquisition.

      I also have some choice properties for rental or lease and these are giving me around 12% return annually which is not bad at all as compared to time deposit rates of 5.5% fixed for 5 years, or 3.2% for 360-day Treasury Bills. The stocks or equity market is quite bullish here but I don't have much time to watch the timing when to sell for a margin. And besides, real estate is my game, and my being a Civil Engineer is one of my greatest advantage I think. My wealth of experience in my long stint in managing a real estate development company here in Manila is also helping me.

      I was born and raised here in the Philippines - it's quite a beautiful and sunshiny country of more than 7,100 beautiful islands with white beaches. You will definitely love the place, and our hospitality and warmth as a people. Come and experience it yourself.

    • profile image

      Steve Nichols 8 years ago

      Now's the time to invest in real estate according to what I've heard from local agents. Deals are out there waiting for a qualified buyer. That's the issue though - qualifying for a loan. If that's not an issue, then buyers can find real bargains.

    • Caregiver-007 profile image

      Margaret Hampton 10 years ago from Florida

      Excellent hub, Lissie. Real estate investments do require a lot of market area demand analysis, comparative rental pricing, anticipated inflation in values, realistic maintenance and management estimates, the right professional advisors, tax analysis, skilled workers, and so much more ... which you, as a real estate investor know well. It's not simply a case of "buy and hold" unless you are planning to hold raw land out in the country for 20-40 years as a long term strategy, anticipating expansion in that direction. So thanks for your words to the wise!

    • Lissie profile image
      Author

      Elisabeth Sowerbutts 10 years ago from New Zealand

      Thanks for visiting - yes I agree Angela a good team is critical for your success

    • Angela Harris profile image

      Angela Harris 10 years ago from Around the USA

      My grandparents invested in real estate and did VERY well for themselves. 3 people they always had on their team- very competent lawyer and accountant, and an ambitious real estate broker.

    • amy jane profile image

      amy jane 10 years ago from Connecticut

      Excellent hub, as always :) I have a passion for real estate too!

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