How to Start a Successful Real Estate Business in New York State
How to Start a Successful Real Estate Business in New York State
Real estate has always been one of the most secure wealth development options, as it appreciates faster and holds its value better than other investments. New York state, with its high income and access to some of the world’s largest businesses, has consistently been one of the best-performing markets in America, making it a natural fit for those wanting to get into this specific business.
Starting a real estate business can be daunting for the beginner, as the cost of entry is much higher than other options, such as buying stocks. However, you shouldn’t let this deter you from pursuing success in this field; following these tips will help you approach a new real estate business with confidence.
Tackle Your Mindset
A new entrepreneur will face many struggles as they build their business, but some of the most difficult are mental. Entrepreneurs are very driven, which is incredibly helpful, but they may also have a strong need to control everything in their environment, which can serve as a detriment to their process.
Before you begin your research, take some time to figure out your goals and working style, then confront some of your negative mindsets, such as being afraid of taking risks or a low tolerance for failure. Every business goes through rough patches, especially at the beginning, and you need to develop a willingness to face setbacks if you are to ultimately succeed.
Create a Business Plan
All businesses need a good business plan, and a real estate business is no different. When you’ve decided that you want to become a real estate professional, it’s time to create a strong business plan.
Most new investors start with residential real estate, as it is cheaper, easier to manage, and has more straightforward business management. Commercial real estate requires a bit more skill because you will be negotiating large, multi-year contracts with other business owners, or you will have multiple residential units to manage at once.
Consider what kinds of properties you will acquire, how you will identify a good investment, and what you will use them for. Vacation properties are particularly popular all across New York State, but they do especially well in more rural areas where commuters from New York City come to destress from the Big Apple. Decide what area of the state you will target, determine a budget, and discuss your prospects based on the current market.
If you’re struggling with this aspect, getting in touch with other real estate investors can be very helpful. The New York Real Estate Investors Association (REIA) is a helpful community of other investors who can provide you with practical advice every step of the way, from creating your business plan to identifying good prospects once you’re ready.
Explore Your Loan Options
Most new investors use loans to buy their first property, and these are typically similar loans to what you could get for a residential property; namely, conventional loans and government-backed loans like FHA loans. These offer smaller down payments, lower interest rates, and advantageous terms that help you build up your income stream. You can leverage your real estate investment contacts built up through the REIA to find the best lenders and how others financed their first properties.
Once you have a few properties under your belt, you can pursue a DSCR loan in New York. These are specialized, investing-specific loans that utilize the Debt Service Coverage Ratio (DSCR) to determine eligibility rather than your financial circumstance. The income generated by the property is divided by its debts to see whether it has a healthy enough income stream to pay for its own mortgage, taxes, insurance, and association dues.
Find the Right Property
What makes a good residential investment property depends on your specific purposes. For a rental property, you’ll think like a homeowner: you want a safe home in a good neighborhood near the closest amenities, like parks, schools, and shopping districts. However, there is the added aspect of balancing the asking price with the return on investment: does the home’s expense match up with market rents in the area? Have property values risen consistently in the past few years, or is the area on a downswing? You’ll want to consider these elements, as well as the actual property’s characteristics.
For a vacation property, you generally want somewhere quiet and scenic but still within a good driving distance of popular attractions. School districts don’t matter because your tenants will only be staying for a few months at most, so you want to consider places with low property taxes. You also want to ensure that it’s easy to find and get into the property, usually one with a dedicated driveway so that your tenants are not bothering other residents.
If you’re not sure about an investment, you can ask a real estate agent what use case they think is possible for a given property; they are generally a wealth of knowledge about real estate and can help set you on the right path.
Closing Thoughts about How to Start a Successful Real Estate Business in New York State
Starting any business comes with its struggles, but you can remedy many of these with the right mindset, good planning, a strong community of allies, and a keen sense of good opportunities. With adequate funding and an understanding of your loan options, you’ll create a healthy income stream in New York state in no time.
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