As an 18-year-old entrepreneur just starting out, one of the best decisions I made was begging 33 banks to lend me money. They all said no. However, it taught persistence, and with number 34, it sparked my first real estate deal.
Looking back 20 years later, I’m grateful to this wide-eyed believer and his lesson learned, because both set my businesses up for success that wouldn’t have been possible, especially without understanding the ins and outs of real estate. To help you not make the same mistakes, here are three tips on how you can use real estate to support entrepreneurial efforts.
1. Utilize Passive Investing
Entrepreneurship takes a lot of time, so any form of passive income can be extremely valuable. For those wondering about the meaning of passive income, it’s income produced by vehicles that don’t cost you a lot of active time. Somebody I’ve worked with in the past and followed is Justin Donald, who is an educator in passive investing. After reading through his content, it’s clear that real estate can be one of the common vehicles for passive investing.
Ranging from mobile home parks to massive skyscrapers, numerous versions of investing in real estate exist, which can result in consistent passive income. Therefore, you don’t have to start off with a skyscraper and can start with something small. As your passive income grows, it allows you to not only have a better cash position, but ultimately it saves you time to focus on entrepreneurial efforts.
2. Explore Your Lending Options
One of the smarter investors I know is in the midst of some pretty complex deals. After speaking to him however, I found out that he doesn’t own much real estate. I can’t imagine how much he is worth, but he has trouble finding the right bank. This is because banks typically like collateral. Banks understand real estate, whereas most of the time they don’t understand how valuable his other businesses are.
Real estate can be used as collateral for larger business deals you need funding for. The banks speak this language. They get it and like it. Another option to consider, which is a little lesser known, is a debt-service coverage ratio (DSCR) loan. A DSCR loan is solely based on cash flow generated from an investment property and not on your personal income.
3. Realize It Doesn’t Have to be Long Term
A misconception about real estate is that it’s a long-term investment because you need to hold onto it for some time to make the purchase worthwhile. I have to admit, most of my investments have been long-term real estate investments. However, that’s not the way it’s always done.
Recently, I’ve been reading information on wholesale real estate investing, and it’s been fascinating how real estate also can be a short-term investment, sometimes taking less than 30 days and requiring no money. Whether you’re a beginning investor or hobbyist, you can find success that will lead to more, oftentimes larger, opportunities. In today’s market, opportunities that have the potential to turn into long-term investments seem endless.
Though it took some time to land my first real estate deal, it has since allowed me to understand how real estate investments play into the long game of entrepreneurship. Not only can this type of passive investment help promote other projects, but with digital currencies becoming more utilized, it can create other opportunities that may not have been previously available.