Caspar Chou Shares The Top 10 Lessons from a Professional Real Estate Developer and Investor
The real estate industry can be complex, and it is worth speaking with prominent investors and developers to gain insights on how it works and how people can become successful.
Caspar Chou, a real estate developer and investor from Alhambra, California, shares the top 10 lessons he has learned from his career, sharing the information that inexperienced investors need to make a successful start.
1. Work Within Your Area of Expertise
It is best to define your niche and stay within it while learning the ropes of real estate investment. It is easiest to get your start in the industry if you familiarize yourself with one area of investing and focus your energies on learning about it. For example, you may be interested primarily in multifamily residential properties. It is better to become an expert before branching out into commercial real estate.
2. If It Seems Too Good to Be True
Be wary of deals that seem too good to be true. For example, don’t pay for real estate courses that promise to teach you how to turn a zero-dollar investment into a six-figure windfall. Be sure that you keep your head on your shoulders and don’t become swayed by get-rich-quick schemes. You will need to understand exactly how to construct a beneficial deal before putting your cash into a property.
3. Analyze All Deals
Deals need to be analyzed thoroughly before you spend money or incur debt. It can be harder to find a good deal than you would expect if you do not have experience in the field. Do not rely on formulas that tell you exactly how much money you should be able to make from a property. Instead, do your own calculations.
4. Understand Realistic Valuations
There is no worse feeling than signing on a deal and finding out that you overpaid for the property. This will tie up unnecessary money and cause you to lose your leverage overall. Having a sense of what properties should be priced is a huge asset when investing professionally in real estate.
5. Calculate Your Cash Flow
You must calculate your cash flow accurately in order to make a profitable investment. For example, if your property needs a lot of work before you can sell or lease it, you will want to figure this into your cash flow calculations.
6. Leverage Your Network
The best deals will not be found in multiple listing services or the pages of a local real estate newspaper. Optimal deals are those that are found through word-of-mouth and through your professional network. Keep your professional network strong by attending events and frequently checking in with your best contacts to keep your relations cordial.
7. Take a Step Back from Greed
Don’t let the prospect of a huge turnaround on an investment sway your decision-making process. Many people see dollar signs when they consider investing in real estate because they have heard great things about the industry, but it is a complex industry to enter. Caspar Chou states that you should have a solid handle on the basics of the industry like those listed in this article before you start putting down money.
8. Return on Investment Starts with Excellent Management
Caspar Chou reminds investors that property management is huge when it comes to making a significant profit. Happy tenants have their properties managed and maintained well. When you have long-term tenants, you can ensure that you have a long-lasting cash infusion into your business. In addition, maintaining a property will lead you to better resale values in the future.
9. Build a Cash Reserve
You need a cash reserve to survive in professional real estate investing, but it doesn’t have to be huge. You can get by with several thousand dollars. In basic terms, you need to be able to pay for a few months’ worth of expenses at a time. Your cash reserve will grow over time, and you will be able to do business with a bigger cushion.
10. Avoid Bad Neighborhoods
Leave bad neighborhoods to the specialists. Don’t be swayed by locals who claim that the neighborhood is about to turn around. Make sure that you see clear signs of increasing quality and valuations before you try to invest there. There are simply too many variables that could go wrong when investing in a distressed area.
Building Your Real Estate Career
When you are first starting out in real estate, these important tips from Caspar Chou will help to guide you. Researching the industry and the neighborhoods in which you want to invest will pay off in greater profits.
Above all, focus on your cash flow and your return on investment. These figures will guide you into making beneficial deals and keep you from becoming mired in situations that are difficult to exit.