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Beverly Hills Real Estate Investing 101 – Best Steps to Get Started

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outside look at luxury Beverly Hills home for sale

Image courtesy: themls.com

Ultimate Guide to Investing in Beverly Hills Like a Pro

Like any investment, the goal of Beverly Hills real estate is to place money in an investment today that will increase so that you have a bigger amount for the future. The risk you take may be large, but you can cover it as well as taxes and the cost of owning the property (utilities, maintenance, etc) when you sell it for a good price.

Of course, if it were as simple as that generic definition, everyone would be doing it. However, if done right, it comes with huge benefits. For example, if you buy a home in Los Angeles and sell it for the best price you can get, you can pay off a mortgage, car debt, pay for college or better yet, get a nice nest egg that can see you through retirement.

The best part is that you can make money from real estate in a number of ways. Here are some of them that you can start off with as a novice investor:

1. Appreciation

When a luxury Beverly Hills CA home or any property for that matter increases in value due to changes in the market, the land that surrounds it gets busier as well. This can happen if you decide to upgrade the land around your investment with say a parking lot for a major mall that is located nearby.

However, the appreciation value can be a bit tricky to determine not to mention risky, especially if you are playing with a large amount. In such cases, having a real estate agent by your side and who is proficient in the luxury home market is a good idea.

2. Income from Cash Flow

This type of real estate investment focuses on property that can generate regular cash flow for you, such as an apartment complex. While the money the tenants pay as rent should be used for maintenance and repairs throughout the building, the leftover funds can be utilized in other investments. You can also get a decent flow of cash from car washes, office buildings, and storage units you own.

3. Real Estate Income

This income is generated by experts in the industry who receive a cut from the sale of each property that they sell for you. They also keep a portion of the rent – for daily management of a rental building, for instance.

4. Ancillary Income

This can be a huge cash cow for you in terms of Beverly Hills, Los Angeles real estate. Ancillary real estate involves income-generating elements that are present in property such as vending machines, Laundromats, or laundry rooms in low-income apartments, etc.

Consider them as mini businesses that are part of a larger investment which allows you to collect money from a pre-existing collection of different customers. In other words, if for example, the vending machines go bust, you can still breathe easy knowing that you have an extra source of income from the laundry machines to tide you over.

Get a Good Head Start

As a new investor in Beverly Hills real estate, you should learn the ropes first before taking on large investments. Some of the first things you need to do are investigate the local market, build a network, and learn how you can raise money without committing to a deal you cannot handle.

You can use the experience and the capital you gain to experiment with other strategies in the future and use what you have learned to make better decisions. Here are some options that will give you a good head start:

Wholesaling

One of the best and quickest ways to make big money in Beverly Hills real estate is via wholesaling. This method may seem over the top in the beginning, but the risks can be worth the cash you can generate.

As is apparent from the name, as a wholesale real estate investor, you secure properties that are valued under the market price, and you look for end buyers to buy the contracts from you. In other words, you don’t actually own the real estate, but you do make money with a fee which you mention in said contracts.

The aim of wholesaling real estate is to create a robust buyers list or investors who are looking for the next property they can invest in. To attract them, you will have to run a lead generation campaign, but you will also have to convince them to invest and add them to the list.

To do that, you will need to collect their contact information, buying criteria as well as the type of funding they prefer. That way, you will know the kind of deals you need and how to contact investors when you locate properties that meet their criteria.

What makes this strategy great for novice investors is that you don’t need to spend much capital to get started. Even though you will be paying for marketing, you will not be the actual owner of the properties. Plus, this way, you can create a strong network of contacts as well as a better understanding of the market.

Prehabbing

Not to be confused with real estate rehabbing, which involves funds for improvements and maintenance, prehabbing only involves minor updates to an existing property. In other words, as a prehabber of a Beverly Hills home, for example, you will just be making slight enhancements to make the property visually stunning to potential buyers.

In other words, rather than splurging on over the top alterations, you can use this strategy to save money and still make the property sale worthy. Here are some ways you can do this:

De-clutter – Remove debris and clutter from around the property and do some general cleaning as well. You will be surprised at the drastic change the property will undergo after it.

Add paint – If you want to impress buyers with a chic and modern design, paint the walls with neutral colors. That way, they can imagine other colors on the walls without being forced to go with the existing décor.

Spruce up the landscaping – Potential buyers are put off by drab exteriors, and many can turn away without even going inside. Improve the property’s curb appeal by sprucing up the lawn and adding some extra elements such as a small pond or fountain to make the home look more appealing.

Of course, this does not mean that you should prehab every Beverly Hills luxury home you can get your hands on. Not every property is suitable for a prehab. Look for ones that are sturdy and just need some spit and polish to make their value increase. Research listings and be on the lookout for homes that look a little run down and are located in good neighborhoods.

REIT Investing

REITs or real estate investment trusts are great for new investors. The equity variety is basically organizations that own real estate that generates income for them. Shares from the company are bought up by investors and which generate income for them through dividends. This real estate strategy is perfect for beginner investors who want to pursue it as a full-time career and need a passive yet steady revenue stream at the same time.

REITs may seem like stocks, but they pay better dividends in comparison. Start by researching them in the market and check out the records yourself. This includes how well an organization will grow in the future and existing dividends. Hiring a financial advisor who can guide you in selecting REITs will also be a good idea.

The best way investors use REITs is to expand their portfolio. It also helps them penetrate the Beverly Hills real estate market and allows those who are not in the position to buy properties to benefit from real estate. While there are some variables, this strategy is known for delivering solid returns without high risk.

Questions All Novice Real Estate Investors Should Get Answers to

Now that you know what kinds of Beverly Hills LA real estate strategies, you can experiment with, your job is just getting started. There are some questions you should get answers to before dabbling in any of the aforementioned suggestions.

The first step you need to take is to determine what your goal is. These questions will help you set realistic expectations about your investment choices:

  • When do you plan on retiring and how much money will you need when you do?
  • How much money do you currently have for retirement?
  • How much money are you willing to put in real estate?
  • Do you want to use investments to generate cash flow or for growth in general?
  • Do you have good credit?
  • Are you planning for college, travel or do you want to look after your parents in their old age?
  • Do you need a tax break?

Once you have answered all of these questions, create a timeline, and stick to it to reap the best rewards from your investment decisions.

The other thing you can do is determine where you currently are when it comes to finances. Even if you are excited to invest, the money you have may tell a different story. These questions will help you determine if you have enough funds to go for it:

  • How much money do you have left over before the end of the month?
  • How much debt are you in?
  • How much are you paying in taxes and what part of that can you reduce with real estate?
  • Do you know a trustworthy financial advisor or CPA?

After getting answers to these questions, you can take the next step in your investment decision based on how much you can afford and the tax benefits you can claim. In other words, these answers will help you determine your purchasing power.

That is also when you can leverage real estate to pay off the loan you take for a property. That way, you will be able to buy property without paying too much for a down payment. This, in turn, will give you more cash for other investments.

Once you have determined your purchasing power and net worth, you need to determine the financial strategies you can use to fund your investments. Here are some questions you should ask yourself during this step:

  • Which funds are you willing to use as down payment and can it be liquidated?
  • How much money are you willing to use to finance your real estate investments?
  • What kind of loan will be ideal for you in the future, keeping your current and future financial situation in mind?

The aim is to understand a financing strategy for real estate that can help you decide on the type of properties you should invest in. Should you go for a luxury Beverly Hills home, a simple multi-family unit or a large office building, or should you invest in land and foreclosures only?

Whether you want to use real estate to expand your portfolio, generate income for a college fund or save for retirement, the market will be on your side one minute and your enemy the next.

dayroom at luxury Beverly Hills home for sale

Image courtesy: themls.com

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