John D. Rockefeller, considered one of the greatest American magnates, once said, “The major fortunes in America have been made in land.” As one of the most influential and most business-minded men in American history, he probably didn’t come about this realisation through mere chance. He likely came to this conclusion through purposeful and intentional moves, akin to running a business.
This is the approach that property investors need, too. Many are simply relying on fortunate circumstances in order to secure a good property. But this isn’t a viable blueprint to follow. Strategy and foresight will trump luck in terms of property investment and are necessary to succeed in the U.S. property market. So in order to thrive, you have to view property investment through the same lens you would view running a business.
Good businesses succeed with thorough planning and with their eye on long-term success rather than just short-term gain. Sustainability plays a big part in a business because you want it to continue running long after its inception. Good businesses are also consistent and follow a model in order to ensure that they’re reaching their established goals.
Treating property investment in the U.S. like a business furthers your chances of good investments and the maximisation of these investments for success.
Why is property investment a business?
Getting into property investment without a plan is risky as it leaves you without any success indicators and a pretty flimsy way of going about things. Sure, there’s still a possibility of doing well, but there are no actual guarantees in place—and you don’t want that.
Being able to operate from a business standpoint at least gives you the stability you need to measure success, identify how you can go about an investment and a business plan you can constantly look back on and revise or review if necessary. This plan should include your goals, what you want for your future, and how you will get there.
Property investment requires consistent work. You can’t just expect it to work out after setting everything into place once, it has to be continuous and constant, with you always reviewing your plan, going over properties, and weighing up if an investment will be a good one or not. Like a good business, you can’t expect it to run smoothly if the work is inconsistent and the quality is lacking.
It’s also difficult to tackle property investment alone because of how complex it can be. Several experts in different fields need to be part of your team in order to maximise success. In a business, a team works together to reach a certain goal or hit a certain mark. Having a team in a business can ensure productivity and efficiency as different people can work on different things that cater to their skills.
Investing overseas is a business because you need to be strategic, have a plan in place, and work as a team to succeed.
5 ways to turn U.S. residential property investing into a business
It may sound difficult to shift how you operate in terms of property investments but these five methods can help you turn it into a business.
1. Capital helps you get started
Getting a headstart is never a bad thing and one good way to do so is to secure capital. Just like businesses need capital, property investment does, too. You need that money in order to fund any venture, even real estate ventures in the U.S.
Capital can cover the actual cost of the investment and even the fixes or renovations you plan to make to the property.
Finding capital can be the tricky part. Money can be a difficult thing to procure but there are three possibilities, especially for investing in the U.S: Joint ventures, land contracts, and private equity.
A joint venture is when two people come to an agreement and invest in a property together given that you have complementary skills that will benefit you both when it comes to the property. Say you’re more savvy with the real estate market and pitching the property and someone has the capital and the maintenance power for it. Investing together and using both your skills will help you make a sale.
A land contract is when you secure a property and make payments to the vendor or owner for it over a certain amount of time. More often than not, the house is still in the owner’s name until you’ve fully paid it off.
Private equity is, as the name suggests, a private pool of money used to directly invest in other companies or ventures. It’s an alternative way of financing that is flexible in terms of loans, making it easier for foreigners to invest in U.S. property.
2. Be in it for the long haul
Be real, there’s no recipe for instant success when it comes to both business and property investment. It takes a long time to lay out your plans, to set them in motion, and to receive the spoils of your effort. There’s nothing instantaneous about either of the two. So buckling in and being patient is all part of it.
Instant gratification is something we all look for now. We want everything quicker, to get results faster, and for things to arrive on demand. Sometimes we settle for short-term success because we want to succeed right away, shrugging off the possibilities for the long-term. But it goes without saying that if you want long-term success, like a good business aims for, you have to have the tenacity to stick with your plan. The rewards of short-term success will probably fizzle out just as quickly as you attained it, which is why you should aim for something more permanent and sustainable.
Stan Lee, for example, was about 38 years old when he contemplated parting with Timely Comics and creating his own set of superheroes to rival that of DC’s. When he did, he created an entire universe that’s become so well-loved that it paved the way for dozens of movies and series and an entire web of crossovers. With patience and perseverance to create something that he loved, he was able to find success.
3. Time and effort sets up success
Putting in the time and work every day to research your property/ies is also important.
Just like putting together a business, you can’t haphazardly slap it together. You have to take the time to review the right people for the job, where they fit, how the business model works, and what you count as a success indicator. Effortless, lazy work yields sloppy results. The same goes for property investment.
If you don’t put in the time and effort in finding good prices, identifying the best investment opportunities, making good renovations, and working with the right people, you can compromise your success on a property. By putting in time and effort into these four areas, you can set yourself up to thrive. If you don’t, you will end up paying too much for a property, having shoddy renovations, and even find yourself stuck with an unreliable team. Like we said earlier: Effortless, lazy work yields sloppy results.
4. Finding (and hiring) the right help
No matter how good your vision is in a business or in property investment, you’re only as good as the team you hire. If you get the wrong people, you’ll fail to attain that vision. Being able to find good people to help you in the capacities you need them to will be vital to what you picture the property to be.
Just like in a business, you should screen people, look at their strengths and weaknesses, and the skills they have, as well as any references they can offer. If they align with what you want, they can certainly help you out.
When investing in property in the U.S, you need property managers, maintenance contractors, and real estate agents.
A property manager will deal with tenants head-on and have the keys to your property. They’ll be the ones to handle the tenant. Having a good property manager ensures that they will have a pleasant relationship with a good tenant, keeping the property safe from damage and both the tenant and property manager happy with how they interact with each other.
A maintenance contractor is in charge of the renovations and repairs and, as their name implies, the overall maintenance of the property. Keeping the property in tip-top shape will keep you from shelling out more money for small fixes that could have been avoided.
A real estate agent handles the “selling” of your property to a future tenant. A good one will ensure that they buy at the right price and will pitch your property well, showing off all the good aspects and playing up strengths.
5. Commit to reinvesting
One clever business practice is reinvesting, the act of purchasing additional shares from what was invested before instead of receiving the profit. It sets up a business for success in the long-term and can help grow profit exponentially.
This goes for property investment in the U.S.
Take Warren Buffet’s investing career as an example. He started out in high school with a friend, buying a used pinball machine and installing it in a barber shop. It did so well that the two, instead of settling with the money they’d earned, reinvested in more machines and installed them in more shops, growing their profit.
Instead of cashing in right away, reinvesting can help grow the distributions you’ll receive in cash by an exponential amount. Rather than investing in one property and stopping there when you get your desired amount, use that to invest in another property since the U.S. property market is booming. You’ll definitely find other property investment opportunities that can bring you more profit.
Investing in property in the U.S. is a great opportunity right now, but going into it blind and without a plan can hurt your investment in the long run. Being strategic in implementing goals, and going about it like a business will bring you the success you need in the market, promising you even more of it the more you do it.
If you’re interested in pursuing property investment overseas and need advice, download our guide, specifically on investing in the U.S – “7 Simple Secrets to Investing in U.S. Property”. Let me know what you think!