Real estate freaking is possible in India
How and with what legal form do I start as a real estate beginner?
This is how you get started with real estate investment.
Would you like to invest in real estate?
But don't you know how to start?
Have you already dealt with the subject of real estate investment in great detail and still not quite sure how to get started?
No problem, you are not alone with this.
That's why I would like to help you a bit at this point and spoke to professional investor Thomas Knedel. Here are his tips for getting started with real estate investing
But one by one.
Who is Thomas Knedel anyway?
Thomas Knedel, born in 1968, is a passionate real estate investor. As a schoolboy, he decided to go this way. Immediately after completing his training as a civil engineer and real estate economist, he invested in his first apartment building in 1998.
Today Thomas invests - preferably together with co-investors - in apartment buildings and residential complexes with upgrading potential and passes on his knowledge online in forums, video courses and webinars.
In addition, it offers workshops on the topic and an annual congress as well as mastermind groups for interested real estate investors.
He also specializes in the provision of templates and software for investors to consulting services.
But now to the interview with Thomas Knedel.
Thomas, how do I, as a beginner, build up a real estate portfolio particularly quickly?
There are two ways:
Fix and Flip Strategy
The first way is the so-called "Fix and flip strategy"i.e. buy, upgrade and sell.
Here you build up a lot of capital quickly, but you also have to have a good base of equity. You buy a property, upgrade it by renovating it and then selling it immediately. You earn the most money by upgrading.
However, if you don't sell it straight away, but leave it / rent it, nothing much happens to the property anymore, your capital is then tied up. This variant is very suitable for building up capital in a relatively short period of time. However, it is also very tax-intensive.
Locations with a low multiplier
If you are not the “fix and flip type”, then the second way can be to invest in locations with a low multiplier (ratio of purchase price to net annual rent).
You then specifically look for properties that have a high cash flow. That means, in not so good locations, but still stable or just stable. There are locations that are about to “crumble”, but there are also locations that will remain stable for a long time.
However, this strategy is more for advanced users.
And the bank does not go along with every location. You have to talk to your banker about it.
So be careful with that.
What period of time are you talking about
with "Fix and Flip"?
If you focus on it and take care of it, it can happen very quickly.
I am speaking from one to two years.
In your opinion, what should you pay attention to with “Fix and Flip”?
There are two parameters for "Fix and Flip":
The marketing speed
On the one hand, there is the speed of marketing. That means how long is my capital tied up.
The rule here is as short as possible so that you can make the next deal. Depending on the property and the market, the period is 3, 6 or 9 months, i.e. less than a year.
There shouldn't be much time between buying the property and selling it.
The second parameter is the margin.
That means, I buy an object for the amount X plus additional costs plus renovation costs and all management costs, as well as the financing costs.
In the end, I'll sell the property again.
The difference between the purchase price including the costs listed above and the sales price minus taxes is the trade margin.
This should be as high as possible so that I get remunerated for the high risk and my quick action. Because: The faster I act, the higher my risk that something can go wrong. One must never forget that every transaction involves risk.
On the other hand, it's a great way to build capital.
No profit without risk.
With "fix and flip deals" you should make at least 20 to 30 percent profit.
How do you proceed strategically?
First of all, you should definitely talk to experienced investors about it.
Then you should think about all possible sources of purchase for a while.
Researching the Internet only works in the rarest of cases.
Ask yourself the question: where is the best place to buy real estate?
Be creative, come up with something. To do this, of course, you also have to expand your network of real estate agents, project managers and investors.
Should you set up a GmbH for "fix and flip deals"?
As a beginner without much experience, you have to be clear about whether I want to do “Fix and Flip” at all?
If you decide to do this, then you should consider: Do I do this alone or with someone?
Then I would work with a good tax advisor right from the start, so I would declare the purchase of the property for tax purposes very cleanly.
In the beginning it is better to set up a sole proprietorship rather than a GmbH. You should definitely handle the first 2 to 3 deals as a sole proprietorship, as establishing a GmbH costs money. Maybe after 2 to 3 "fix and flip deals" you will have enough of the matter and never do any again. And then you have the GmbH and all costs on your cheek.
From a tax point of view, the "fix and flip deals" in sole proprietorships are not ideal. But you can separate them cleanly from renting and leasing.
And if you don't do too much and if you register everything properly together with the tax advisor, the sole proprietorship is a good alternative to the GmbH.
If you then find out after 2 to 3 deals that you are having fun and that your business model works in the market, then I would definitely set up a corporation (e.g. GmbH).
On the one hand, this minimizes your risk and, on the other hand, it is also more interesting from a tax point of view. Since the personal tax rate is always the highest, you don't necessarily have to push it up any further. Further deals are in good hands in a GmbH.
I always advise you to start small but still professional with a tax advisor, to gain experience and, if you like the business model, expand it further.
The cardinal error, that many beginners do:
You save on the tax advisor.
They only ask in forums what and how they should do it, or they do some other research and in the end they tinker with their real estate investments all by themselves. That can really go bad.
So, please do not skimp on good tax advice, take some money at this point and register your sole proprietorship with your tax advisor.
Great, thanks for the tips, Thomas!
Incidentally, Thomas Knedel offers a course “Becoming a professional real estate investor in 6 months”. Here you can sign up …..
Get started, do your research and learn from the pros!
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Your Maria Singer
P.S. Do you have questions about financing, financial viability, investment strategies, what your next step could look like, what you should definitely pay attention to in your situation? Feel free to ask me your questions, I'll be happy to support you! Here you can find personal advice.
Links contained in this post:
Immopreneur Congress by Thomas Knedel
Real estate insider video course: "Become a professional real estate investor in 6 months"
Book: Success with residential real estate by Thomas Knedel
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