By Yinka Kolawole, with agency report

LAND is a finite resource. People need a place to live, work, shop and play, so even in a bad economy, real estate investment usually fares better than stocks. It is really just a matter of supply and demand.

What’s more, real estate continues to appreciate despite occasional slow-downs in the economy. In fact, it’s proven to be the best way to create wealth, and an investor in real estate need not be a genius to succeed. Following are some tips for entrepreneurs on getting started and succeeding in real estate investment.

Plan financial goals
Before you buy that first property, or do your first analysis, determine what you expect from your investments. What are your financial goals? In the “time vs. money” concept: The more you have of one, the less you need of the other to reach your financial goals. This means that you shouldn’t shy away from taking the time to understand your goals and make sure each investment is a step toward achieving them.  If you are unsure exactly how to create financial goals, meeting with a financial advisor is an excellent first step.

Act on information 
You absolutely do need to learn some basics before venturing into investing. So, be sure to do some studying, but don’t let “buying and collecting” information become your endgame. Again, having goals in mind will make the process much more straightforward. It’s easy to get so tied up in the “research” phase that you never actually take action. Instead, write down specific questions you want answered or goals you want to meet before delving into the latest book/seminar

Consider many options 
Don’t just grab the first property you look at. Too many investors buy properties because they “look nice,” or the investors don’t want to put the work in to look at what’s really out there.
Remember, you won’t be living there, so don’t make your investment decision based on your personal preferences.

While you shouldn’t fall into the trap of analysis paralysis, make sure you are thorough in looking through properties. Give yourself a wide range of options, and then narrow them down based on the criteria (goals) you have set for yourself.

Don’t wait for perfect deal
Many rookie investors suffer from “a-better-deal-may-be-just-around-the-corner” syndrome. This can backfire in a big way, and you could potentially let a great deal slip just because you’re holding out for something better.

Your task may feel difficult if this is your first property, but you must realise that the “perfect deal” rarely exists. Better to execute on a deal that meets most of your criteria than wait for another that may never come.

Thorough financial analysis

Be realistic. Look at different alternatives to determine which makes the most financial sense. And never buy property at a higher price or on less attractive terms than what makes sense.
Be wary of sellers that try to over-estimate the value of the property through pro-forma (estimated) data. While you can certainly use a pro-forma to start the conversation, make sure you know the real numbers before closing.

The most important figures you should know are: Net income; Cash flow; Return on investment; Cap rate (net income/property price); and Cash-on-cash return (cash flow/investment). In each case, “investment” refers to how much you invest in the property. ”Debt financing” refers to any loans you may have to take to buy the property.

And “total return” refers to cash flow, equity accrual (i.e., equity gained from your tenants paying their rents), appreciation and taxes. Once you have understood these figures, you should have enough information to determine whether or not acquiring the property fits with your financial goals.

Target motivated sellers
If the seller is motivated to sell, you’re not likely to get the price best aligned with your financial goals. So, how do you know if a seller is motivated? Look at the asking price. For example, if the property has been on the market for a year for, say, N20 million with little-to-no price reduction, the seller is clearly not very motivated to move the property.

However, if that same property has been on the market for a year and has had its price moved down considerably, the seller most likely wants to do whatever it takes to get the property off his or her hands. Of course, this raises the question of how to find motivated sellers. There are many approaches, and not all of these will work for you, depending on what property you want.

Differentiate investing from business
As an entrepreneur, you already have a business, and real estate investing is best used to support that business, not replace it, unless that’s your intention. In other words, don’t get so caught up in executing transactions that your core business falters.

If that happens, you’ll be facing a bumpy road to get back to stability. Unless your business is itself real estate or you’re looking to get into the business full-time, always remember that pursuing these deals is a means to an end, not an end unto itself.

So, if you’re interested in staying ahead of taxes, inflation and the economic downturn while building security for the future, investing in real estate investing may be your best option.

*Culled from enterpreneur.com