Real estate investing is the art and science of buying real estate. African Americans have long known the benefits of homeownership, yet there’s much more to the real estate game beyond your home. Becoming an investor is where the real wealth can be built.
The three most common ways investors build their portfolios is through residential (including ranches and estates), commercial and land. When done properly, investing is a great way to build short-term and long-term wealth.
Let’s start with your ABCs.
You need a team that consists of an attorney, banker, and construction manager. Your attorney will understand the inner workings of real estate deals. Your banker can help finance deals or sometimes even give you the inside scoop to help you finance your deals. Your construction manager will help you keep renovation or building costs down.
Later, you’ll also need a CPA to keep your finances tight. Ideally, if you can find a mentor to show you the ropes or even just to have a friendly conversation with you at the start of your investor career, you’ll have a better shot at success.
First, pick your market, i.e., your location. Most people start scouting in the cities where they live. Once you’ve found your target area you need to become a student of that area. Study the history, trends, and projections for your location. Buy a notebook so you can start gathering materials, data, and information on your new business.
Next, decide on your primary strategy. Will you focus on foreclosures, new construction, or flipping? These are just a few of your options. If we use foreclosures as an example, the first thing you’d do is contact the owner of the property and try to secure a contract, which is called a short sale. A short sale means that the individual would sell their property to you or your group before the lender or bank gets involved.
Although not necessary, a great real estate broker can be a huge asset. Fast and accurate information on properties is critical in the real estate game. Your broker will have access to multiple listings that will allow you to stay ahead of the game.
Show Me The Money
You may have heard of OPM? Other People’s Money? It’s real. And it’s completely possible to finance your investments without spending any of your money. You simply find people with money to finance the deals. These can be family members, well-known investors, or frankly, total strangers who want to get off the sidelines and into real estate. Getting your deals financed takes a solid plan. If you can show people how doing business with you makes sense, you’ll find partners. Once you start getting results, your partners will be willing to finance your deals.
Once you’ve done your first deal you’ll know how to be better in your next deal. The name of the game is turning profits. Don’t let greed get the best of you. If you make even a little cash on your first deal, you’re doing well. Reinvest your profits back into your business. Once you build a solid reputation as an investor, not only will other pros in your area want to work with you but you’ll also have the confidence to seek bigger deals and build bigger wealth.
Alonzo Harris has been a real estate investor and developer for more than 40 years. He and his sister, Fran Harris, own Harris Real Estate Partners, a Dallas-based company that develops residential and commercial properties including live-work, residential, hotels, and even sports complexes. Fran Harris is the founder of Black Business University, an online course marketplace for black entrepreneurs, companies, and CEOs.