Copyright by Valen Vergara
Entrepreneurship is taking off like never before. A report was released recently that estimates that in 2020 alone, over 548 million people became entrepreneurs. That is over 62,500 new entrepreneurs every single hour. Statistics have shown that 8/10 people have reached financial freedom through the business of real estate investing.
Indicators are showing that more than a quarter of Canadians are considering purchasing real estate as a means to increase their income. The likelihood that you will be involved in a real estate transaction and own property one day in Canada is higher than in most other areas in the world.
If you hold a mortgage, you are actually investing in real estate, and therefore, you are already a real estate entrepreneur! If you are stuck, and uncertain if you should start real estate investing, here are some major reasons to consider real estate as a career choice.
Real Estate Has Cash Flowed Forever
Creating an income by way of land ownership and property controlling has been common practice for centuries. Feudalism was a combination of legal and marital customs in medieval Europe that flourished between the 9th and 15th centuries. It was a system of structuring society around real estate relationships in terms of various use cases of land in exchange for labor and service roles. Sound familiar? Thought so!
The fundamentals have not changed overall and presently these structures are still in place. Renting out land and offering real estate is one of the oldest forms of entrepreneurship in practice! Back then, the aristocracy owned the vast majority of the territory. Everyday people in need of vacancies sought out Kings, Royals, and Lords and paid tenant income to take residence and were tasked with maintenance of the Manor and given the responsibility of caretaker. Today, even though the wealthy own a lot of land and property, it is a different story, now any person can own land and property if they just have enough of a reason to do so!
Make Use of Other Income Sources
If you think you cannot afford to purchase real estate, you simply need to find someone who can. This is when you use borrowed funds from private lenders to raise the return on investment. For instance, leveraging borrower funds to purchase real estate supply on margin. The borrower now can use these funds on credit and structure repayment terms and conditions bound to legal agreements.
Generally, the payment schedule is one of two structures. The first can be a fixed preferred return in which the lender receives a flat interest rate before the borrower receives any profit. The fixed preferred return can be paid per annum (yearly), disbursed monthly. For example, if a lender charges the borrower 1% per month on any unpaid balance, the per annum rate is 12%.
Secondly, the borrower may extend the opportunity for the lender to take part in an equity split partnership where the lender and the borrower share cash flow that results in an income property after all expenses, mortgage pay down, and equity appreciation.
Either way, both parties can take advantage of real estate investments in this way and form a joint venture agreement. This is when a “money partner,” and a “working partner,” work in tandem and invest in real estate operating under specific terms and conditions.
Risk, Reward, and Return
For the most part, unlike investing in stocks or securities, real estate investments can lower your risk-adjusted return.
The risk-adjusted rate of return is improved by calculating how much risk is involved in generating a return. This is represented by a numerical rating. The risk-adjusted rate of return is factored in after carrying out a risk assessment regarding your investment over a predetermined time horizon.
Correspondingly, when comparing the same risk categories with many other investment classes, statistically, real estate has a lower growth risk and a better risk-adjusted return or comparative performance.
Taking into account different real estate cycles, the act of simply holding on to real estate can create a higher return just by marketplace appreciation, without any danger of overall portfolio risk. Now that is a reason for the season!
Life, Liberty, and Property
The famous philosopher John Locke wrote that “all individuals are equal in the sense that they are born with particular absolute natural rights. Among these fundamental rights, Locke said, are “life, liberty, and property.”
Real estate property investments are physical assets and are quite tangible. Everyone needs a place to live, and quarters are always in high demand.
If someone does not have the down payment to purchase a home, they most likely will be able to come up with a damage deposit and rent. Real estate has always been an invaluable commodity to all socioeconomic groups and for places of business.
Owning and managing land and property means you can add value to areas where it is needed most. Controlling real estate and forcing appreciation into your investments can cause gentrification. Gentrification is what happens when an area appreciates in value and undergoes urban renewal and community economic development.
The value of the real estate will always remain because shelter is a basic necessity! Many would say it is a human right. If you own or manage real estate, you can control your social environment and create economic freedom.
Learn from Other Leaders
Each industry has nuances to discover, which you can only understand over time. Yet, you can avoid many mistakes new investors make in the field of real estate if you get training from experts who have “been there, done that.” The formal education system has a serious lack of representation when it comes to teaching about real estate investing. Academia has fallen short in this way. In the real estate industry, the best way to learn is through apprenticeship training. Where a student learns from a skilled master. This is an accelerated learning program like no other. Just like most trades, this is how it has been done for a very long time.
Seeking coaching and mentorship helps you identify and implement proven strategies that actually work in this industry. The knowledge you uncover from specialists can help you gain the essential skills you need to become a top-performing real estate businessperson. Today, there are many online courses taught by successful real estate entrepreneurs which are just one search away.
Overall, you can get started in real estate, and these reasons and others lend a helping hand to begin building a real estate business. You can make reasons not to get involved in real estate or allow the right reasons to get you going and to start.
Valen Vergara is a bestselling published author of multiple publications, award-winning social entrepreneur, and senior executive. His primary concentration is on the acquisition, funding facilitation, and management of real estate development and financing transactions. He is active in key industries such as angel investing, energy, financing, infrastructure, mining, and non-profit. Valen also earned a certificate for entrepreneurial studies at Harvard Business School and was featured as a cast member on the movie Game Changer. Valen is the President of Team Made Group of Companies. He is also the COO of the renewable energy company, Origenne Corp.
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