As a real estate investor, you have to invest with purpose and for profit to be successful. You have to think above a landlord. Adopt the business skills of a business executive and create your portfolio with best places at best prices. If you are thinking “How?”, then we have the answer. It is a multi-step process. Follow the our steps and you’ll certainly gain both, ‘purpose’ and ‘profit’ on your investment.
Consider the Investment Options – Target the best market
While you plan to invest in affordable housing, there are certain groups that the housing market targets. You should select a certain group and make your investment accordingly.
Senior Citizens and People with Disabilities
In USA, studies show that people belonging to this group will be forming a major portion of total population in next 20 years. This means increase in their housing needs. Make a plan today to assist them tomorrow. Include facilities in your plan that specifically target their needs.
Off Campus Housing Facility for Students
The number of international students is increasing day by day. To cover up the expenses of living in a foreign country, they prefer off campus housing that costs them less. Target a location near a study campus to generate most profit.
Off Base Housing for Military Personnel
Some military personnel prefer living off the base due to certain complexities of living in the base. If your target audience are military personnel, then you should invest in an area near the base. Make sure you are familiar with federal contracting and specific guidelines for each service branch in this case.
You may plan affordable housing for homeless people, recovering addicts, group homes for people in protective service and mental health systems. Such programs prefer neighbourhood based housing. If your investment targets this market, make sure the apartments are adequate and provide the needed security.
The affordability level you define as an investor will determine the profit and market value of your property. Determine the median income for your area using authentic data. Through this median income value, determine an affordable rent or home ownership amount that is 30% and 35% of the median income respectively.
To earn profit on your investment, determine the operating expenses. This include taxes, insurance, utility bills, maintenance charges, registration fee etc. that you pay as an owner. This applies for rent units.
To determine the profit on sale units, calculate your financing costs, closing costs at acquisition and at the time of sale, material and labour costs for construction/ maintenance and property transfer costs.
Determine the cost on marketing of your property. Consider your income and calculate your profit on each unit using this formula:
Income – Expenses = Gross Profit
Now determine your cash flow and calculate net profit.
If your property has no market value, you cannot generate any profit and vice versa. Consider the market trends of your target market regarding people’s needs and housing costs. Also keep a close watch on market needs and enter the market when you will be welcomed most generously.
Make an investment when the prices are at its lowest. And earn profit by renting or selling whatever is most fashionable in the market.
Look for a Suitable Financier
Now that you know your target market, look for an investor who can join hands with you. In addition to these, ensure the following:
- Be informed about similar programs across the country
- Be a part of the market to avail the best opportunities
Through these steps, create your goodwill in the market. This way, you can successfully aim at a purpose and generate profit on your investment.