12 steps of the real estate investing process you need to know

Real Estate Investment Process

Successful real estate investment means you understand the investment process inside out. We’ve created a 12-step flow chart of the real estate investment process. You can download by clicking on this link: https://bit.ly/2R2QpJl 

Education

  • Learn about the fundamentals of real estate
  • Understand how the economy affects the real estate market
  • Form strategies and plan around your investment goal

Market research

  • Take time to understand a specific niche market
  • Surround yourself with like-minded real estate enthusiasts
  • Read multiple market reports

Sourcing experts

  • Find the right experts with the right domain
  • Be clear on what you need
  • Understand their scope and fees before engaging experts

Sourcing projects

  • Find comparables within the area
  • Drill down into the details
  • Keep track of your findings

Conducting due diligence

  • Don’t interpret the findings and results
  • Keep track on the progress with checklists
  • Check with experts regularly and see if they spot red flags

Fundraising

  • Prepare a clear and detailed business plan for investors
  • Make sure you are aligned with shareholder expectations
  • Be transparent about the potential risks

Bidding on projects

  • Communicate clearly on your terms
  • Get advice from your experts on your terms
  • Follow the steps during the transaction process

Financing

  • Source multiple options before committing
  • Assess how the financing terms affect the project
  • Maximize your risk-reward tolerance for leverage

Negotiating

  • Ensure your agent/broker is acting in your best interest
  • Be patience and disciplined during negotiations
  • If something doesn’t feel right, protect your interest by taking the time to evaluate. If not, you can always walk away

Transacting & closing

  • Make sure the fund flow is clear
  • Ensure all agreements are well-documented
  • Make sure the experts acknowledge the fund transfer

Managing the property/asset

  • Appoint experts with the right experience
  • Build a healthy relationship with your tenants
  • Keep track of your performance

Selling

  • Get advice from experts on the price point
  • Do your research to find the best time to sell
  • Find out how other similar and nearby projects’ marketing effort

If you are clear on these steps, you can find the property of your dreams without wasting precious time and effort. We will layout more detail for each step in the future.

Do you find this tip helpful? What real estate tips would you like to know?  Please share with us in the comments below.

5 Questions To Help You Develop Your Real Estate Investing Niche

5 Questions To Help You Develop Your Real Estate Investing Niche

How to find your investment niche in real estate? Speak with experts and other investors, read market reports and look at comparable transactions. Let your curiosity run wild and follow through with your intuition.

1. Which market excites you?

Be precise about and stick to what you’re looking for. For example, a “residential property in London” would return a wider search result than “2-bedroom luxury apartments in Prime Central London”, which is more precise and actionable. Knowing your exact target market will narrow down your search with more effective sourcing of information and experts.

2. What is the investment for?

A lot of investors tend to make the mistake of thinking that good property should be held forever. If your intention of the investment is capital growth, at what point would you be satisfied with a return (or loss)? Is the investment for rental income or self-use? Being crystal clear on your intention will help you realize your investment strategy and manage your expectations.

3. What is the demand and supply of this niche?

Understanding your target market’s cycle will give you a better idea of picking out signs of recovery after a fluctuation in performance and any potential for future growth in the area. Being or having someone on the ground will help you gather feedback from experts and gain an updated feel of the neighbourhood’s development.

4. Where do you find potential projects from your niche market?

Don’t put all your eggs in one basket. Try working with multiple real estate agents or brokers that specialize in your niche market. You can start by asking their opinions on comparable properties and understanding which opportunities would fit your investment criteria. If you do not know any real estate agents or brokers, you can ask this question on Denzity’s forum to gather suggestions from experts.

5. Are you aware of all the potential risks?

When you’ve made an investment in your target market, you should understand the elements which might have a drag on your investment’s performance. What are the elements which will influence your investment? We suggest making a discounted cash flow with a base case, stress case and worst case to predict the potential risks that might affect your investment.

If you are clear on these details, you can find the property of your dreams without wasting precious time and effort. You might also become an expert of the market!

Do you have other tips for finding your real estate niche? Share with us in the comments below.

4 Key Habits Of Successful Real Estate Investors

Real estate investment is one of the most stable asset class for income generation and wealth preservation. However, investors should ascertain four core skills to be a successful real estate investor.

Plan ahead

Create a solid plan and treat your real estate investment as a business with a short-term and long-term goal. More importantly, be sure to consistently review your investment’s performance so as to manage expectations in your investment plan. This ensures you are clear along the journey towards your ultimate goal. We suggest you develop a 3-5 year plan based on thorough research to meet your ultimate goal.

Know the market and develop your niche

To be effective, you need to gain in-depth knowledge of the markets that you want to invest in: from past to present to future. The ability to spot trends can help you more accurately predict future changes in the market. Identify the different ways that might help you to make your real estate investment a success. With having those practices, your investment will not rely solely on faith and luck.

Keep educating and learning

Similar to the previous habit, you need to constantly stay up-to-date with the market and evaluate future potential. You can educate yourself by getting real estate-related investment information that is readily available online, attend real estate related seminars or exhibits. Finding a mentor or having a network to guide you can shorten your learning curve and get better results, which brings us to our next point.

Build a network of savvy investors and experts

You are not on your own! Real estate investing takes years of experience and in-depth wisdom. Having a network can provide you with support and create opportunities for the people involved. Savvy investors and experts understand the importance of building a network together to collaborate and succeed together.

Real estate investing is not easy. Becoming a successful real estate investor requires time, effort, and commitment. By following these four habits, you too can develop the skills and traits to be successful real estate investors and unlock your full real estate investing potential.

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Top 5 topics on real estate investing in Germany

This week, we want to share with you the top five topics on real estate investing in Germany from our community.

Read more: https://forum.denzity.io/tags/germany

1. Can a foreigner buy property in Germany?
Read more: https://bit.ly/38aEhO1

2. Can a non-EU citizen buy property in Germany?
Read more: https://bit.ly/2sQxHMF

3. Is this the right time to buy property in Germany?
Read more: https://bit.ly/2OU5qx9

4. How much does a property manager charge for an apartment Munich [Germany]?
Read more: https://bit.ly/2YsnMbN

5. What’s the leasing term like for residential units in Munich [Germany]?
Read more: https://bit.ly/2Lty1ar

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3 Key Factors That Drive The Real Estate Market

Before you start looking into specific real estate investments, you must understand some key factors that might affect your decision.  So, we think it would be a great idea to give you a quick reminder before starting your search. 

The Economy
The real estate market is closely linked with the economic cycle. Even if the property is sound, your investment (at least on a mark-to-market basis) might be dragged by economic factors. During the economic downturn, there tend to be some negative effects, such as the unemployment rate rises, and consumption level decreases. These combined might cause risks to your investment.

Government Policies
Government policies affect the economy and influence (both local and foreign) investors’ sentiment. During political instability, people might delay their purchases or sales to wait for the certainty of the directions and the policy implications. Tax credits, deductions, and subsidies are some of the ways that policy may affect your investment.

Supply and demand
Population demographics affect how real estate is priced and what type of properties are in demand. Additionally, social and cultural aspects might affect different markets in certain areas. Being aware of these trends can help you to think about your investment strategy.

All these factors are intertwined and it’s all about timing. Understanding the connection can help you to conduct a better evaluation of potential investments. If you are uncertain about what you want, speak to real estate experts! They can deliver the knowledge and insights you need to fast track your search. 

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What do you want more or less of? Other suggestions? Let us know! Please give us feedback on our forum.

Weekly Digest: Top 5 topics on real estate investing in Japan

This week, we want to share with you the top five topics on real estate investing in Japan from our community.

  1. How would the gambling license affect the Japan hotel market?
    Read more: https://bit.ly/33ulIB8
  2. What’s the process for foreigners to buy Japanese houses?
    Read more: https://bit.ly/2R37rZA
  3. Which area in Kyoto [Japan] should I look for a vacation home that is also close to the train station?
    Read more: https://bit.ly/34vhr1n
  4. How much tax should I pay when I sell my condo [Japan]?
    Read more: https://bit.ly/37Qteta
  5. Would you suggest investing in Japan car parks?
    Read more: https://bit.ly/33BeueJ

What you need to understand about real estate capitalization rate (Part 1 of 4)

Real estate investment is an opportunity to generate regular income and achieve capital appreciation in a stable asset held over a 5–15 year period. Real estate investors typically compare investment opportunities start by using one key metrics: Capitalization Rate, aka Cap rate.

In this article, we highlight how you should understand how to compute the cap rate and how to use cap rate when comparing different real estate crowdfunding investment opportunities.

This is part 1 of 4 articles covering the real estate cap rate:

  1. What is the real estate cap rate?
  2. What you need to understand about the real estate cap rate?
  3. How does the real estate cap rate form part of your investment analysis?
  4. How leverage helps you achieve your investment goal in real estate.

Part 1: What is the real estate cap rate?

Cap rate is the rate of return on a real estate investment property based on the income that the property is expected to generate. It is calculated by dividing the property’s net operating income (“NOI”) by the current market value or acquisition price of a property.

Capitalization rate = Net Operating Income / Current Market Value (Source: Investopedia)

Once an investor knows a property’s cap rate in a specific market, the cap rate can be used to compare with other types of real estate cap rates located in different markets around the world to understand which is more suitable to their investment preference. We have made a quick guide for you below:

Understand the Real Estate Cap Rate

That’s it!

Let’s use an example: an investor (Bill) wants to achieve a 12% annual return over 5 years by investing in real estate.

Bill decides to purchase an office building for $600,000 that generates $60,000 of net operating income (NOI), which represents a 10% cap rate. This means the property value would need to increase by at least 2% per year to meet Bill’s goal of 12% annual return.

Bill decides to achieve his investment goal by being more dependent on the cash flow (net operating income) generated as rent by the office building’s tenants, rather than a strong capital appreciation.

In this example, Bill is characterised as a defensive, income-based real estate investor seeking real estate investments that require minimal out of pocket expenses (e.g. refurbishments). In case you are wondering: yes, we will cover different investing style and types of investment play in future blog posts.

In Bill’s case, the cap rate is a key metric to begin his initial screen to compare real estate investment opportunities. For example, a shopping mall being sold at an 8% cap rate means that Bill would rely on (i) strong capital appreciation and/or (ii) leverage in order to achieve Bill’s goal of 12% annual return.

Cap rates are an important way to screen investments and narrow down a list of investment opportunities which suit your individual preference. Once you’ve decided on which investment opportunity to pursue, you will need to gain a better understanding of the real estate’s location and market conditions to form your investment analysis.

An important aspect here is timing — something which Denzity wants to clarify with ‘cap rate compression’, explained below.

What will we cover in Part 2?

We have just scratched the surface when it comes to cap rates! There are more metrics you should take into account when making an investment decision.

In our next article, we will discuss how you should understand and compare the cap rates of different types of real estate located in different places around the world to decide on which best suits your investment preference.

We at Denzity are here to help you understand the key metrics and provide insights. We hope these articles provide you with insight into the real estate investment process and journey!

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