Tag: build your business Page 1 of 4

Active vs Passive Income: Differences and Exploring Opportunities in both

Active income Vs Passive income

What is active Income? 

An active income is money made from selling goods or performing an actual service. These come in salary, wages, tips, commissions, profits from selling a good, and cash from rendering a service. Like the word ACTIVE, an active income comes from actively doing something. 

Generally, staff at company X working 8 hours a day and getting paid about 5000 dollars a month earns an active income because he has to be present on the job to make that. In the case of a structured working system or personal business, the worker can only increase his pay because of a promotion or if the self-employed person doubles sales or the speed of working within that same time. 

A person earning an active income can only make as much as what the job or service offering can provide, and if the individual stretches beyond the limits of their strength, they might spend all their income on healthcare. 

What is Passive Income?

Passive Income

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Passive income, earned ‘passively’, is a lucrative way to make money. Unlike active income, which demands your constant presence, passive income often requires minimal or no direct involvement. 

Money generated from property rentals, intellectual properties, and streaming royalties are all examples of passive income. The beauty of passive income is that it can generate significant wealth without the need for physical labour. 

Whether a business is considered passive or active income depends on specific criteria. For instance, if a business owner works less than a hundred hours, the Internal Revenue Service (IRS) categorises such earnings as passive income. This distinction can help you understand your income type and plan your financial strategies accordingly. 

Difference between Active and Passive Income

  1. A person making an active income is actively working to make money, while passive income makes money for a person without needing that person’s presence at all or for so long. 
  2. Active income is ‘time-bound ‘, meaning it is earned within a specific period and requires physical presence on the job. In contrast, passive income is not time-bound; some passive income streams can continue to produce even after the original earner’s death. This distinction in income types can significantly impact your financial planning and long-term wealth accumulation.
  3. Active income earning is almost instantaneous, while passive income takes time. 
  4. Active income usually does not require initial capital; even in that case, it’s less capital-intensive than some passive income.
  5. An active income is entirely predictable and reliable, but with most passive income, you cannot outrightly dictate your possible income. 

5 Passive Income Options in 2024

  • Housing/Property rentals 

This is an expensive option for passive income because it will always require some massive amount of money to build, buy or mortgage a house for rental. However, some other options in rentals can earn you passive income, even in the real estate sphere. Connecting House owners with those seeking to rent can even be a great way to earn passive income. Throwing up an advert online for someone who wants to offer their house for rent can make you a commission. 

  • Creating a digital product

In our digital age, the potential for growth and scalability in passive income opportunities is immense. Products have evolved beyond physical goods, with some of the wealthiest individuals today selling virtual products. Creating digital products like Stock Photos, Online Courses, E-books, and Music can significantly earn a substantial passive income, with the potential to grow and scale over time. 

Passive Income selling E Courses

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Here are a few websites to upload stock photos and music – Create your website, Adobe Stock, SmugMug, Shutter Stock, Alamy and Fotomoto 

  • Create affiliate or referral links

If you have a large social media following or even a few thousand followers who trust and are loyal to you, you can upload affiliate or referral links on your social media handles. If your followers click these links, you can earn some dollars if they buy or subscribe to any package. 

  • Investing in your friend’s new company

If you have an enterprising friend who is building a business or wants to scale up their company, investing hundreds or a few thousand dollars can earn you a fortune. In the 21st century, companies have risen to become global conglomerates in less than 20 years. Such an investment might be a short-term investment in the long run. 

  • Creating Videos on social networks with partnership programs

If you’re creative or enjoy sharing your thoughts, then uploading videos on YouTube or similar social networks can be a great way to earn money, with the potential for significant long-term benefits. In recent years, advancements in mobile phone camera technology have made creating visual content more accessible than ever. This could be the start of a long-term, lucrative passive income stream. 

Final Note 

Investing some of your money in passive income can help strengthen your passive income portfolio, and you might even be retiring sooner than you have imagined and just spend the rest of your life fulfilling your passion and travelling the world with your loved ones. If you find out that there is a specific passive income stream you would love to invest in, then do your research in that field, and after you have solidified your knowledge, you can begin to invest in it. 

Trade Secret: Definition, Law and Frequently Asked Questions

Definition of Trade Secret

Trade Secret Basics

It’s common for many people to have secrets known only to them or very few people. These people are always a privileged few who have, one way or the other, earned the privilege of this information. The same applies to some, if not most, of the global conglomerates worldwide. It is called TRADE SECRET. 

A trade secret is a classified practice or development method in a company that is only accessible to a few people, mainly within the company’s core circle, and inaccessible to the general public. This classified information gives the company a marketing advantage over its competitors. 

A trade secret is often the result of several months or years of research, development, test-running, and improvement. Every brand knows that if it can stand out from other brands in a distinctive manner, it will have a better competitive advantage. 

Laws governing Trade Secrets 

The Economic Espionage Act of 1996, as described in Chapter 90, Title 18, Part I, of the United States Code, governs the definition and protection of trade secrets in the United States. Furthermore, due to a 1974 proceeding, trade secrets are subject to state jurisdiction, allowing each state to create its laws on trade secrets.

A trade secret is different from a patent in that it must be kept secret, and the company’s ability to keep it confidential is the key to protecting its competitive advantage. Unlike a patent, a trade secret is not something you can entirely stop another company from using if they can come up with that information through their personal research and development or market research. 

Patterns, formulae, designs, recipes, prototypes, procedures, software, and computer codes are all examples of forms that trade secrets might take. The public will be completely unaware of these because of their unique characteristics. But in whatever shape it takes, it has to;

  • Be Classified 
  • It must hold a financial for the developer
  • It must be in active protection

Navigating Copyright: A Guide to Protection and Infringement Prevention

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What are Copyright Laws? 

Copyright is a legal structure that protects unique authorship works, including a wide range of creative artistry that are eligible for protection. Thanks to the protection of specific creative works, authors, artists, and producers can freely develop without worrying about unauthorised reproduction or exploitation. Only the original creators or authorised parties are granted the exclusive right to reproduce by this intellectual property right. Copyright law gives creators the sole right to duplicate and use their original work for a set period. When copyrights are removed, the item is released into the public domain and can be used without restriction.

Filing for copyright in the US 

Copyright protection is essential for protecting the originality of a creative product, allowing for legal protection in cases of reproduction or exploitation. It does not grant the right to be the foremost producer but ensures that the law supports legal action against anyone or corporation infringing on the original work. 

Copyright Laws

Image Source: https://www.copyright.gov/

In the U.S, every registration is done with the U.S. Copyright Office, with a filing cost ranging from $45- $600, and this can be done physically or virtually if you are tech-savvy, during which some forms are given specifically for the creative artistry to be registered. Usually, to obtain a copyright for any original work, it does not have to be public, but it must have been produced and possess a tangible distributable form. Some of these are: 

  • Pictures
  • Paintings
  • Literary works
  • Performing arts
  • Musical Projects
  • Website content
  • Sound recordings
  • Motion pictures/Movies
  • Software and Database
  • Custom architectural designs

You can check this chapter in U.S. Copyright material to learn more about the materials that qualify for copyright according to the U.S. Copyright Office’s compendium of practices. 

IP Protection Essentials for Startups: Safeguard Your Innovations and Stay Ahead of the Competition

What is Intellectual Property?

Intellectual property (IP) is the cornerstone of innovation, describing intangible assets (non-physical assets), creations of the human intellect owned and legally protected by an individual, a group, or a company. It’s the answer to any creator or inventor’s concern: ensuring that non-tangible assets can be treated with the same rights that apply to tangible assets. Today, most developed nations have structures and legal facilities catering to tangible and intangible assets, empowering startups and creative individuals to protect their unique ideas and stay ahead of the competition. 

The word intellect speaks about the faculty of reasoning, which is why intellectual property refers to inventions solely as a product of a person’s thinking ability. Intellectual property can take many forms; the most common are patents, copyrights, trademarks, and trade secrets

Although intangible, intellectual property may be far more valuable than a corporation’s concrete assets because it may give a competitive advantage. It is jealously guarded and maintained by the businesses that own it. Companies are vigilant in recognising and preserving intellectual property since it is valuable in today’s knowledge-driven economy. Furthermore, creating valuable intellectual property necessitates substantial investment in creativity and specialised work time.

IP Protection Essentials basics

The first thing you need to know as a creative individual looking to protect your intellectual property legally is that you do not just protect an idea because you think it is spectacular. A concept is not patentable, but the precise instructions for solving a technical difficulty are. 

Personal loan: How to get one, Advantages and Disadvantages.

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Introduction

A personal loan can provide a convenient solution when you need to consolidate debt, cover your rent, or fund a project, especially if you’re unable to secure a low-interest credit card. Perhaps your credit card’s limit isn’t sufficient for the loan you require, or the bank is requesting collateral that you don’t have. In these situations, a personal loan can offer a straightforward and accessible option.  

Securing a loan was once a more challenging process, with limited options available. However, the rise of fintech companies has significantly increased the accessibility of personal loans. In fact, TransUnion, the company responsible for credit scoring, reported that in 2018, personal loans without collateral or security reached a staggering $138 billion, with Fintech companies accounting for 38% of that. This is a significant shift from just five years ago when fintech only accounted for 5%. 

While the availability of personal loans is a positive development, it also means that making an uninformed decision could lead to regret. However, there’s no need to panic. This blog post is here to help you navigate the personal loan landscape and make the right decision for your financial needs. 

Types of Personal Loan

Secured personal loans and unsecured personal loans are the two varieties of personal loans.  

  • Secured Personal Loans: A lender will only grant a secured personal loan in exchange for some form of collateral.  A Certificate of deposit, A saving, or An asset like a House, car or boat can also be taken as collateral to offset the loan when the borrower defaults. Most financial institutions prefer this because it guarantees they can get their cash. 
  • Unsecured personal loan: An unsecured personal loan is one in which the lender does not request any security to guarantee that the borrower will repay the loan. This often differs from the banks’ preferred option because it places much risk on their path. However, banks, online lenders, and credit unions also offer personal loans to borrowers who meet specific lender requirements. Unlike secured loans, unsecured loans come with a higher percentage of interest. 

THE ROLE OF BUDGETING IN FINANCES

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Introduction 

Being a graduate of a prestigious university and making a considerable income does not guarantee your financial safety. According to Parkinson’s law of spending, which states that expenses rise to meet income, people’s expenses will always increase proportionally to their income. This law validates the idea that people do not end up poor only because of the absence of money but also because of a lack of financial literacy. 

Financial literacy is the effective knowledge and understanding of using financial products, such as savings accounts, investments, and insurance, and skills, such as budgeting and debt management, to manage money and save individuals from financial unaccountability, fraud, and scams. 

To be financially literate is to have an intricate understanding of how money behaves; by doing so, you have established a life-long profitable relationship with money. Most people don’t get financially trained in college, but thanks to “Effective Business Idea,” you are about to gain the power to control your finances with a free financial education. 

The most fundamental knowledge you must acquire when working towards financial independence is the skill of budgeting. Budgeting plays a vital role in ensuring adequate money inflow and outflow, helping to increase accountability and prudence.  

What is a budget?

A budget is a planned estimate of anticipated income and expenditures for a certain period in the future, and it is created and reevaluated regularly. Everyone, from individuals to families of varying means, as well as governments and corporations, may benefit from developing and sticking to a budget.

Budgeting helps you control your monthly spending, prepare for the unexpected(rainy days), and buy luxury goods and properties without debt. Keeping a budget can be a smooth process; it doesn’t restrict you from buying what you want, but rather, it gives you the freedom to maintain a grip on your finances and a clearer picture of where your money is going.

Introduction to Budgeting

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Are Online Banks Trustworthy?

Are Online Banks Trust worthy

Online banks are financial firms that provide banking services mainly or totally through the Internet. Their services range from account opening to bill payments and CD investments. 

Online banks operate 24/7 and offer lower fees, fewer time limits, higher savings and CD rates, and cashback rewards.

The main drawback of Online banks is their exclusive virtual operation: Customers will be unable to deposit or withdraw cash due to this. Some online banks offer ATM services, like Capital One 360, blending physical and virtual operations, widely recognised as online. However, these developments still do not entirely remove the doubt many still have about online banks. 

In this blog post, you will get a very definite understanding of how online banks handle security and if you can trust an online bank to keep your earnings.

FDIC’s role in bank security

In 1933, Congress inaugurated the Federal Deposit Insurance Corporation (FDIC) to keep the country’s banking system stable and the public’s trust in it. This was an urgent and highly needed move because, in the 1920s, spanning into the early 30s, a national bank failure resulted in a severe loss of many American savings. 

The FDIC has been saddled with the responsibility of Insuring financial institutions, bringing accountability, and increasing customer protection. Part of the duties is to make significant economic issues easily resolvable. Since its inception, the FDIC has proven its capacity over the years by changing the US banking security trajectory. 

Aside from federal government funding, the FDIC collects premiums from its members to cover expenses and compensate depositors at failing banks. The bank deposits the money into a Deposit Insurance Fund (DIF), with banks paying based on insured deposit balances and risk levels.

Related blog post: What are online banks? Features, Drawbacks & Reputable Banks.

Achieving Financial Success: Five Habits of Self-Made Millionaires

Title Image - Self-made millionaires

Wealthy people are popularly known for one thing: money. However, only a few people discuss the challenges they face daily to attain the success we celebrate today or the lessons we can learn from their journey through thick and thin. It’s important to remember that ‘When it comes to making big money, it’s not always about luck or inheritance.’ You need to understand that many self-made millionaires share common habits that help them achieve financial success.

Who are self-made millionaires?

These are individuals who have achieved remarkable success through their expertise and hard work without relying on substantial inheritances or trust funds. They made it on their own, earning applause because they truly worked tirelessly for it. Approximately 70% of millionaires worldwide are self-made. Notable examples include Jeff Bezos, the owner of Amazon; Bill Gates, the founder of Microsoft; Warren Buffett, the owner of Berkshire Hathaway; Oprah Winfrey; and Bernard Arnault, the founder of Louis Vuitton. You can learn more about the world’s top self-made millionaires and Billionaires through this link.

If you have been desiring a change in your financial status for good, this is the perfect blog post for you. Let’s explore five simple yet powerful habits that can put you on the path to becoming a self-made millionaire.

1. Budget Like a Pro

Don’t tell me what you value; show me your budget, and I’ll tell you what you value.” Joe Biden

The skill of budgeting holds immense importance in an individual’s day-to-day decision-making. It involves financial projections, which means the ability to evaluate one’s current financial situation and plan for improvement. Self-made millionaires excel at task and project planning, particularly when it comes to prioritising finances on tasks and projects that will yield maximum results. This is the essence of smart planning and budgeting. They are also deeply aware of their various income streams—their daily, monthly, and yearly earnings—and know where every dollar goes. It’s this discipline that earns them the title of millionaires. They budget and save wisely, ensuring that they don’t spend more than their income. 

Self-made millionaires Budget Like A pro

As an individual looking to learn this art, you need to “make a budget that works for you and stick to it. This way, you can save more and invest in opportunities that can grow your wealth over time.

2. Invest in Yourself

Formal education will make you a living; self-education will make you a fortune.”

 Jim Rohn

Self-made millionaires make critical decisions, and their commitment to continuous self-investment is a key reason why they keep moving forward. They understand the potential costs of stopping, which can include failed projects, business ventures, and even a decrease in wealth. 

When you invest in yourself (mentally, physically, financially, and emotionally), you not only appear more knowledgeable and smart in the room but also build meaningful connections with people, clients, prospects, and customers.

As an individual looking to imbibe the habits of a millionaire, Investing in your mind will help you set “SMART GOALS ”, understand the mechanics of money, and grasp the intricacies of building a business. Self-made millionaires excel at spotting opportunities when others do not and navigating failures, bad investments, poor stocks, and debt while staying ahead. They achieve this because they’ve enriched their minds with books and learned from those who’ve travelled similar paths before them. 

  • Investing in yourself can take many forms, such as acquiring new skills, gaining financial knowledge, exploring investment opportunities, connecting with customers, and pursuing side hustles, among other strategies.

Reading books is a vital way to invest in yourself. It allows you to understand the importance of goal setting, the value of gathering knowledge before embarking on a business or idea, and the ability to learn from both the successes and mistakes of others who’ve walked the same path. This enriches your capacity for growth and success.

Reading is a key habit for financial success

Books I will recommend that can help you on your journey:

1. Rich Dad, Poor Dad” by Robert Kiyosaki

This book simplifies financial concepts and highlights the importance of investing and asset-building.

2. The Millionaire Next Door, by Thomas J. Stanley and William D. Danko

It provides insights into the habits and behaviours of self-made millionaires, making it relatable and actionable.

3. The Total Money Makeover by Dave Ramsey

A practical guide to managing money, getting out of debt, and building wealth step-by-step

4. The Richest Man in Babylon, by George S. Clason

This book offers financial wisdom through parables set in ancient Babylon, making it easy to grasp important money lessons.

5. Your Money or Your Life, by Vicki Robin and Joe Dominguez

It helps you understand the relationship between money and life choices, encouraging a more mindful approach to finances.

6. Automatic Millionaire by David Bach

This book simplifies the path to wealth-building, emphasising the importance of automation and consistency.

Happy reading and learning! 

3. Set Clear Financial Goals

How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” 

Robert G. Allen

Robert G. Allen’s quote emphasises the importance of having well-defined financial goals. Self-made Millionaires set both short-term and long-term financial goals, which help maintain motivation and focus on what truly matters. Whether it’s debt repayment, saving for a home, or starting a business, having a specific target can drive you forward.

Establishing Precise Goals:

Wondering how these self-made millionaires craft precise goals and how you, too, can?

  • Articulate Your Desires: Begin by clearly articulating your desires. Define your long-term goals, and then break them down into achievable short-term milestones. For instance, if your ultimate ambition is to attain millionaire status, it’s crucial to identify your passions, define your business objectives, and diligently acquire the necessary knowledge and skills.
  • Identify Key Tasks: Identify core activities that support your goals and can bring you maximum results. For instance, launching a business idea and generating an income exceeding $100,000 within a specific time frame can be among your essential tasks.
  • Outline the “HOW“: Identify the strategies and steps required to achieve your business goals. While doing so, consider your current financial situation, ensuring that your objectives remain realistic and attainable.
  • Monitor Progress: Continuously track your progress and actively seek opportunities for improvement. Regularly assessing your journey helps you refine your approach and achieve better results.

By setting and pursuing clear financial goals with determination and strategic planning, you’re on the path to financial success, just like self-made millionaires.

4. Work Hard and Smart

Oprah Winfrey once said, “The big secret in life is that there is no big secret. Whatever your goal, you can get there if you’re willing to work.” Dean Graziosi echoed this point of view by highlighting that countless self-made millionaires began with nothing but determination and self-discovery. These people are proof that success doesn’t come on a silver platter; it’s earned through hard work, risk-taking, and unwavering determination.

What sets Self-made millionaires apart is their unending commitment to their dreams. Even when faced with setbacks, they chase their goals relentlessly; for instance, Oprah Winfrey was fired from her first media job during her early media career but didn’t give up, still pursuing her dreams with strength. 

Moreover, many self-made millionaires share another common trait: their eagerness to give their own quota to the world. They show empathy for others and often become significant contributors to various foundations.

Here’s a closer look at the key characteristics that propel them to success:

  • Effort and Efficiency: They invest both hard work and smart strategies in their endeavours. It’s not just about working long hours; it’s about finding efficient ways to achieve their goals and seize opportunities to increase their income. 
  • Focused Mindset: Self-made millionaires possess the ability to concentrate their energy on specific goals. They outsource tasks they can’t handle themselves to well-experienced individuals or team members who are also open to learning. 
  • Determination: They identify their core strengths, eliminate unproductive distractions, and maintain a high level of concentration on their objectives.  They are able to identify their core strengths, eliminate distractions and tasks that are not very productive, and their concentration level is very high. 
  • Delayed Gratification: This involves forgoing immediate pleasures to achieve long-term success.
  • Saying No: Self-made millionaires learn to say “NO”, showing their strong critical thinking skills and ability to foresee possible future mistakes and results. 
  • No Procrastination: They take immediate action, understanding that laziness won’t yield great results. 

5. Diversify Your Income

Warren Buffett once said wisely, “Never depend on a single income.” Relying solely on one income source can expose you to significant financial risks. 

Self-made millionaires understand this principle well; they often cultivate multiple streams of income to safeguard their financial future. In addition to their primary business ventures, they explore side hustles and delve into stock investments, real estate, and other investment opportunities, thereby creating robust wealth from different sources.

Here are some fundamental rules they follow, and you, too can imbibe them:

  • Knowledge is key: They avoid investing in areas they don’t understand, ensuring that their investments are well-informed and calculated.
  • Balance Your Resources: While having other side hustles or investments, they avoid funding them from their major income, capital, and profits.
  • Seek Knowledge: They actively invest in their financial education by reading books and consulting financial advisors.
  • Build Your Core Business: Continual investment in their primary business is crucial. It ensures their wealth keeps increasing.  
  • Value Your Team: Treating team members and employees fairly and with respect fosters a loyal and productive workforce. It’s an important part of sustaining and expanding their income streams.

Conclusion

The path to financial success is achievable for anyone willing to adopt these habits. So, start today, and who knows, you might be on your way to becoming a self-made millionaire in the future!

How to Start Your Real Estate Business with What You Have

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Introduction to Starting Your Real Estate Business

Starting a real estate business can be very intimidating when you don’t have a lot of money to invest in it. In fact, the thought of starting a real estate business when you are broke can be so disheartening that you will dump your ambitions of becoming an entrepreneur or a business owner.

The real estate business sphere is an ever-booming sector that has made many rich and still does. It’s a very fruitful field with opportunities for many, ranging from buying properties to their full development, leasing, and selling. All these are viable streams in the sector, and the easiest way to be involved in this business is to have a huge amount of capital that you can invest in the sector. This, however, does not mean it’s the only way to invest in the real estate sector. 

Cash is not the only thing that you can bring to the table; your skill, time, and even professional expertise can help you acquire a portion of the wealth in this booming sector. Let’s look at a few ways to take advantage of this fruitful sector and earn an income without breaking the bank, even if all you have is your knowledge or a relevant certificate. 

How to secure a position in the Real Estate Business

  1. Discover your niche

In the real estate business, there are specific niches in the market you can choose to focus on, and the number you can carve out for yourself is endless. However, when choosing a niche for yourself, especially when you do not have huge capital or even anything to invest in the sector to begin with, your options might be limited. This does not mean that the remaining options are not still able to help you scale up until you can raise enough funds to enter the deeper part of the sector. Let’s look at a few niches in the sector:

  • Location-based real estate

This involves narrowing down on a particular neighbourhood, town, or county. This will help you provide deep knowledge of that area to customers who might be willing to purchase or lease a property there. 

  • Demographic Real Estate 

This involves rendering your real estate business service to a particular group of people, such as first-time buyers, celebrities, military personnel, etc. This is an excellent opportunity to get a referral from those who have patronised you since you started your business.

  • Property rental real estate niche

According to the National Multifamily Housing Council, at least 44 million households in the United States rent their houses. This means that landlords who have properties will contact you if you decide to work hard and be prominent in this niche. You will also constantly get offers because it’s easier and more affordable to rent than to buy a property. 

Other real estate niches are Agriculture, New construction, Ageing and Historic properties. 

  1. Write a business plan for your real estate business.

Do not forget that even though you are starting with what you have right now, which could even be nothing, it doesn’t mean that you will remain like that forever. This means that you have to ‘plan to get big‘ and not ‘get big to start planning‘. 

Having a concrete business plan will help you go from where you are to where you plan to be. A business plan also helps you be able to confidently pitch your business goals to anyone who might be willing to put some dollars into the success of your business. A proper business plan will definitely provide answers to the vision, core values, uniqueness, and business model of the company you are willing to run. 

Have a BUSINESS PLAN FOR YOUR REAL ESTATE BUSINESS

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  1. Find a Mentor 

Learn from a professional around you, send your dream realtor a gift, and ask for a time in his or her schedule to grab a Coffee. It is true that the more you learn, the more you will earn. A mentor walks you through the process and can save you a tonne of losses or problems that can arise from making the wrong deal. 

If you plan to get to the top, you will need to build strategic relationships with people who have gone before you and have a track record of profiting from the business. Some mentors have built a brand that cannot take business deals below a profit margin. They might just recommend you to such clients, and a referral from one industry figure can be a breakthrough for you. 

Have a Mentor for your REAL ESTATE BUSINESS

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  1. Get on social media even if you cannot maintain a website.

One way to increase your potential for securing new customers is to meet new people. A social media account that is not only built around your business but also around your person puts a face to your business, especially in its infancy, and allows customers to trust you better. Don’t be a 21st-century businessperson who isn’t tech-savvy. Be bold and energetic, talk about your business, and land more customers. 

  1. Get into Partnership

If you have a big idea, you will need a lot of money. However, with a great business plan, convincing experience, and a good proposal, you can secure a partnership with someone or a group of people who are willing to invest in a real estate business. This will mean that the angel investor(s) will fund the business while you manage and operate it. 

A big mistake is to enter into a partnership without discussing how you will share profits with your investors. This will ruin the company’s future, and if it doesn’t, it will cause a lot of contention as the company grows. So talk about it before starting off, and if you have already started the business, it’s not bad to do that now. 

A partnership could also mean that you will work with different professionals who are your friends or business partners to develop a property. Then, after selling the property, you will pay them for their service and give them a share of the profit as compensation. 

  1. Be an affiliate

An affiliate is more like a middleman or woman who helps sellers locate buyers or the other way around. The amazing thing about affiliate marketing is that you don’t get to do anything so expensive other than reach the realtor or seller directly and agree on a percentage commission on any invited customer who buys leases or rents. There are other online affiliate realtors like Realtor.com, All Things Real Estate, Avail.co, and Foreclosure.com that pay you for any customer who patronises using your designated affiliate link. 

  1. Sell properties for desperate sellers.

There are many reasons why people choose to sell their properties urgently, such as bankruptcy, divorce, relocation, or diversification of funds into a very promising business deal. This, however, can be complex because a desperate seller might be selling a huge problem to you. The way to avoid this is by doing a diligent search on the reason the seller wants to sell so desperately and having done that, you can reach out to people who will be willing to buy or borrow some funds to buy the property and refurbish it so that you can give them back the capital and an interest after selling it. 

  1. Build relationships with your customers.

Don’t forget that the most effective referral is one that comes from someone who has patronised your business. They are your strongest advocates in the business world for your next customer, especially in a business field like real estate, where a false deal can lead to a loss of millions of dollars.

Follow up on your customers, constantly send them emails, and even if they haven’t patronised you, you already treat them as though they have. This will give you a long-term thinking faculty. A good way to follow up with customers is to employ a CRM tool

Also, Read – Understanding Customer Relationship Management 

Final Note on Real Estate Business

Achieving success in real estate is not merely a matter of getting rich quickly; rather, it is a long-term endeavour. In order to achieve success, you need to be willing to put in the effort and continue to develop by continuously acquiring new knowledge.

A Mortgage: Its Meaning? Pre-approval, Types and Examples

“Mortgage” is a word coined from an old English word used in French law, “death pledge.” It is a type of loan that “dies” when it is either fully repaid or if the borrower defaults.

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What Is a Mortgage?

A mortgage is a loan used to purchase or maintain real estate. The borrower pays the lender over time in regular payments that cover the principal and interest. Mortgages help individuals and businesses buy real estate without paying the entire purchase price upfront. A Borrower is to repay the loan and interest over a given number of years, after which they own the property free and clear. 

In order to secure a mortgage, a borrower must apply through a lender of their choice and have met the requirements of the lender, some of which are:

  • A required down payment
  • A good credit score 
  • A series of paper processes

Having completed a thorough process, the borrower, if found worthy, is then granted the loan to perform the intended purpose of applying for the mortgage.

How mortgages work

Most mortgages are paid in a specific amount over a period of time, with regular payments staying the same but with different proportions of principal vs. interest. Most mortgages are usually paid over a period of fifteen to thirty years, and in the event that the borrower refuses to make payments as agreed, the lender can foreclose on the property acquired. In a foreclosure, the lender may evict residents, sell the property, and use the sale money to pay off the mortgage debt. 

Mortgage: How mortgages work

When a buyer is applying for a mortgage, some of the required documents of interest are bank statements, tax returns, and employment documentation, A credit check is also done in order to validate the buyer’s ability to repay the loan. Following a document review by the lender, a loan amount is determined along with an associated interest rate. Buyers can apply for a mortgage before deciding on a property to buy through a process called pre-approval. This can provide you with an advantage over competing purchasers by demonstrating to sellers your seriousness and readiness. It also helps prevent delays and unpleasant shocks during the financing process.

What is a pre-approval? 

Pre-approval is a conditional commitment from a lender to lend you a certain amount of money for a home purchase based on the accredited paperwork. It usually lasts 60 to 90 days, depending on the lender and market conditions, and is not a guarantee but a strong indication of your borrowing power and eligibility.

The process of preapproval begins with an application to a lender or a mortgage broker, where you will need to provide some documents that prove your income, assets, credit, and debt. The lender will ascertain the validity of your information, check your credit score, and then give you a pre-approval letter, which will contain the loan amount, interest rate, and the conditions that surround the offer. Comparing different lenders and their preapproval results will help you make the best decision.

Why do you need preapproval? 

  • It provides an advantage by narrowing down the search for a property, which provides the buyer with a realistic budget and pricing range.
  • It may increase your chance of getting approved by sellers, who favour buyers with preapproval over those who do not. 
  • The closing process can be fast-tracked because paperwork and verification have already been completed. 

What to do with a preapproval

After you have successfully gotten pre-approval for a mortgage, you can confidently start reaching out to sellers. With your pre-approval letter as a bargaining tool, your real estate agent can begin to search for a property that meets your taste and budget. 

A pre-approval does not close the deal and is liable to change depending on factors like income, inspection, debt, or market conditions. Major financial changes, such as changing jobs, could affect your pre-approval status. Once you find the home of your dreams and have an accepted offer, submit your final loan application and documents. However, Stay in touch with your lender and update them on any changes that might affect the approval. 

Mistakes to avoid during pre-approval

Pre-approval for a mortgage can be a rewarding process. Still, it’s crucial to avoid potential mistakes like getting pre-approved for more or less than needed, only getting pre-approved by one lender, assuming pre-approval is a guarantee, changing financial situations, or disclosing relevant information. Avoiding these mistakes will ensure a successful transaction.

What is the reason for securing a mortgage?

A mortgage is very helpful because the price of acquiring a home is always beyond the realistic earning capacity of most households. This allows individuals, groups, and families to acquire a property with a relatively small initial payment of about twenty percent of the purchasing cost. If the buyer defaults, the property’s value can cover the remaining percentage provided by the lender or mortgage broker.

Types of Mortgages

The Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and the United States Department of Agriculture (USDA) are three examples of government agencies that offer potential buyers access to mortgages through various programs that are tailored to meet the needs of particular groups of people.

Below are a few types of mortgage options:

  • Fixed-rate mortgages: Also known as traditional mortgages, a fixed-rate mortgage’s interest rate is predetermined and does not vary over the loan period.

This mortgage plan shields the borrower against rising interest rates, and the predictability of payments simplifies budgeting and financial planning. Qualifying for a fixed-rate mortgage is easier for lower-risk borrowers than for higher-risk borrowers. 

  • Adjustable-rate mortgages (ARMs): An adjustable-rate mortgage (ARM) is a house loan with regular interest rate changes based on benchmark performance. ARMs, also known as variable rate or floating mortgages, have ceilings limiting annual interest rates and payments. ARMs are suitable for individuals who plan to maintain the loan for a limited period and can tolerate future interest rate increases.
  • Interest-only mortgages: An interest-only mortgage requires instalments covering only the interest part of the mortgage’s balance for a certain period of time, as opposed to paying both the principal and interest. These payments with only interest might be needed for a fixed period of time, offered as an alternate option, or prolonged throughout the whole loan term, requiring the return of the principal balance at the loan’s completion.
  • Reverse mortgages: They are designed for homeowners who have already clocked 62 years or more and are designed to convert part of their home’s equity into cash. These mortgages can be borrowed against the value of the property and receive the money as a lump sum, fixed monthly payment, or line of credit. The entire loan balance becomes due when the borrower dies, moves away permanently, or sells the home.

How to compare Mortgages

In the past, mortgages were mostly available through banks, credit unions, and loan organisations. However, in today’s expanding market for mortgages, we now have nonbank lenders such as Better, SoFi, and Rocket Mortgage. 

If you want to gain insight into how mortgage rates work, try out an online mortgage calculator to estimate your monthly payments. This estimation is based on the type of mortgage, the percentage of the down payments, and the interest rate. It can also check the cost of the property you can afford. 

Can I get more than one mortgage?

It is only normal for lenders to give you an initial mortgage before you can secure another mortgage. The additional loan is usually called a home equity loan. Technically, there is no restriction on the number of sub-mortgages you can get as long as your equity, credit score, and debt-to-income ratio are intact. 

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