All property has some inherent value, but few real estate investors are willing to settle for any land they can find. The real money in real estate comes from finding a diamond in the rough ― a low-cost piece of property that can produce major profits with minor effort. However, most real estate beginners find the process of locating potential property and increasing worth impenetrably (and infuriatingly) complex.
In truth, creating value through real estate development takes some skill, abundant resources, and a heaping dose of courage, but the return can be exceedingly rewarding. Here are a handful of tips to help any apprentice learn the basics of adding value to real estate.
Think Twice About Unpopular Markets
As in any industry, the profitability of real estate is heavily influenced by trends. For decades ― indeed, for centuries ― the trend has generally been toward major urban centers, as buyers and renters eagerly scoop up properties close to work places and cultural sites. Still, even within metropolitan areas like New York, different neighborhoods come in and out of fashion, and before you invest, it is important to know that your property will soon be on trend.
However, it is dangerous to follow that advice too far. Investing only in already-trendy regions is expensive and provides meager (albeit reliable) returns. For bigger (albeit riskier) profits, you might want to reinvestigate the neighborhoods few real estate investors are currently interested in. Especially when it comes to areas in and around cities, these spaces will likely become popular soon, but in the meantime their prices are pleasantly cheap. Thus, you get the opportunity to see the value in your properties increase with almost no effort on your part.
Build a Big, Strong Network
Networking is no longer just a somewhat beneficial method of getting a job; it is an essential step toward building wealth in any industry, including real estate. With a strong network of allies, you have the resources to add real value to your properties without significant costs. For example, getting to know inexperienced and seasoned agents alike provides broader opportunities to find amazing properties. Then, maintaining friendships with contractors could give you cut-rate development services that truly improve property values.
Of course, the way you build your network matters. Most novices will only start relationships with individuals who have immediately obvious worth: They look for what others can do for them. Instead, you should strive to demonstrate your value to other people, so they will want desperately to connect with you. When you have value, your properties will, too, soon.
Gather All the Data You Can
These days, before you do anything, you should consult big data. The Internet, in all its glory, has provided businesses and individuals the opportunity to amass huge amounts of information, which is of supreme importance to the real estate investor. Using big data, you can uncover a region’s recent market trends, its key demographics, its lease prices, and more. You can know everything about a property’s past, present, and future before laying down a dime.
Though it may seem useful to become a jack of all trades, area experts are actually much more valuable in real estate. Getting to know one small area’s intimate secrets provides you with unique information buyers and renters can’t find anywhere else. Whether you focus your effort on learning all there is to know about Manhattan’s Bowery neighborhood or you study the intricacies of green renovation, your knowledge itself adds value to your properties.
Consider Emerging Trends
It should be obvious that not all real estate development provides equal value. Erecting a pre-fabricated barn on your empty land will never be as profitable as constructing an aesthetically pleasing, thoroughly modern high-rise. Just as you consult industry data when you purchase property, you should investigate development trends before deciding exactly how you will develop your property to add value.
The best source of information on rewarding development comes directly from the buyers and renters who will agree to the value of your property. Recently, the most sought-after developments are walkable neighborhoods and sustainable building features, both of which are related to health and environmental awareness. Developing your properties with these considerations is smart, but you should also be on the lookout for those trends that are just beginning to take hold, which, like the unpopular markets of the first section, will be cheaper to invest in and provide larger gains.
Don’t Give Up
At first, real estate is a difficult industry to understand. However, by never relenting in your search for potentially valuable properties and being persistent in your struggles to add more value for future buyers and renters, you will come to grasp the ins and outs of the business. The truth is, no matter what you attempt, you can create value of you try long and hard enough to reach success.