Keys to Personal & Business Real Estate – Successful Entrepreneurship
Published for NCBW Sister-Nomic$® Week
by Deborah Rivers, NCBW National Economic Empowerment Committee Member (Memphis Chapter)
The keys to homeownership involve financial readiness, including saving for a down payment and securing a mortgage, as well as understanding the responsibilities and costs associated with owning a home.
- Financial Preparation:
- Saving for a down payment:
- A down payment is a percentage of the home’s purchase price that you pay upfront when you buy the house. A larger down payment can help you qualify for a lower interest rate and potentially avoid mortgage insurance.
- Pre-approval for a mortgage:
- Getting pre-approved for a mortgage allows you to know how much you can borrow, which helps you determine what you can afford.
- Budgeting:
- Homeownership involves ongoing expenses like property taxes, insurance, utilities, and maintenance. Create a budget that includes these costs to ensure you can afford your home.
- Credit score:
- A good credit score is crucial for getting a mortgage at a favorable interest rate.
- Debt-to-income ratio:
- Lenders consider your debt-to-income ratio (DTI), which is your monthly debt payments divided by your gross monthly income.
- Reserves:
- It’s wise to have a financial cushion to cover unexpected expenses or repairs.
- Understanding Homeownership:
- Home inspection:
- Before buying a home, you should hire a professional to inspect it for any potential problems.
- Appraisal:
- A lender will typically order an appraisal to ensure the property is worth the loan amount.
- Legal review:
- Understand the terms of the purchase agreement and the mortgage contract with the help of a real estate professional.
- Ongoing maintenance:
- Homeownership comes with responsibilities like lawn care, repairs, and potentially property taxes and homeowners’ insurance.
- Additional Considerations:
- Location: Consider the location of the home and its proximity to schools, work, and other amenities.
- Home type: Determine if you want a single-family home, condo, or other type of property.
- Neighborhood: Research the neighborhood’s safety, schools, and amenities.
In 2023, the homeownership rate for Black Americans was 45.7%, compared to 74.3% for White Americans. This represents a significant gap, with Black Americans facing higher rates of mortgage denial and lower home equity. The Black homeownership rate has seen some increases in recent years, but still lags behind other racial groups.
Keys to Owning Business Real Estate
Owning business real estate requires a multi-faceted approach, including securing financing, thorough due diligence, and understanding the local market. Key aspects include defining your investment goals, identifying suitable properties, and assembling a team of professionals to guide you through the process.
- Define Your Investment Goals:
- Motivation:
- Clearly outline your reasons for investing in commercial real estate, whether it’s for personal use or for investment purposes.
- Return on Investment (ROI):
- Determine your desired ROI and how it aligns with your overall financial goals.
- Risk Tolerance:
- Assess your willingness to take on risk, as commercial real estate can involve significant investment and fluctuations in the market.
- Secure Financing:
- Commercial Mortgage Rates:
- Stay informed about current commercial mortgage rates to make informed decisions about loan options, says www.commercialrealestate.loans.
- Financing Options:
- Explore various financing options, including traditional, SBA, and CMBS loans, each with its own pros and cons, says www.commercialrealestate.loans.
- Financing Application:
- Understand the loan application process and prepare the necessary documentation, says www.commercialrealestate.loans.
- Due Diligence:
- Property Inspection:
- Conduct thorough property inspections to identify any potential issues, including structural problems, environmental hazards, and legal restrictions, says The Entourage.
- Financial Statements:
- Examine the property’s financial statements, including income, expenses, and leases, says California Bank & Trust.
- Environmental Site Assessment:
- Perform an environmental site assessment to check for any environmental concerns, says California Bank & Trust.
- Zoning Compliance:
- Verify zoning compliance and review any legal restrictions on the property, says California Bank & Trust.
- Identify a Suitable Property:
- Market Research:
- Understand the local market trends, including property values, rental rates, and buyer demand.
- Property Type:
- Determine the type of commercial property that best aligns with your business needs and investment goals, such as office buildings, retail spaces, or industrial warehouses.
- Location:
- Consider the property’s location, accessibility, and proximity to your target market.
- Assemble a Team of Professionals:
- Real Estate Agents:
- Hire experienced real estate agents who specialize in commercial property transactions, says Bank of America.
- Property Managers:
- Engage property managers to handle day-to-day operations and tenant relations.
- Attorneys:
- Consult with legal professionals to review contracts, conduct title searches, and advise on legal matters.
- Accountants:
- Obtain financial advice from accountants to navigate tax benefits, forecast operating budgets, and ensure accurate bookkeeping.
- Consider Financial Planning:
- Budgeting:
- Create a realistic budget that considers both immediate and long-term costs, including down payments, ongoing expenses, and potential renovations.
- Financial Analysis:
- Conduct a thorough financial analysis to assess the property’s potential profitability and cash flow.
Black households significantly lag white households in commercial real estate ownership, with only 3% owning commercial property compared to 8% of white households. The average value of commercial property owned by Black households is also considerably lower, at $3,600 compared to $34,000 for white households.
Key Statistics:
- Ownership Gap:
- Black households are significantly less likely to own commercial real estate than white households.
- Value Disparity:
- The value of commercial property owned by Black households is significantly lower than that of white households.
- Wealth Gap:
- This disparity contributes to the broader racial wealth gap, as commercial real estate is a significant source of income and wealth.
- Concentration of Ownership:
- Most of the commercial real estate wealth is concentrated in the hands of a small percentage of white owners.
Further Details:
- Undervaluation:
- Commercial real estate in Black neighborhoods is often undervalued, further disadvantaging Black owners.
- Implications:
- This disparity has significant implications for Black entrepreneurship, economic development in Black communities, and wealth accumulation.
- Efforts to Address:
- There are ongoing efforts to address this racial disparity, including initiatives to increase Black commercial real estate ownership and support Black-owned businesses.
To become an entrepreneur, you need to develop a unique business idea, build a solid plan, secure funding, and launch your venture, all while continuously learning and adapting. It also involves building a strong network and embracing challenges as opportunities for growth.
Here’s a more detailed breakdown:
- Identify Your Business Idea:
- Find a Problem: Look for unmet needs or inefficiencies in the market.
- Validate Your Idea: Test your idea to see if there’s a real demand for your product or service.
- Develop Your Product: Create a minimum viable product (MVP) to test and iterate with customers.
- Develop a Plan:
- Write a Business Plan: Outline your business goals, strategies, and financial projections.
- Secure Funding: Explore various funding options, such as personal investment, loans, or investors.
- Define Your Target Market: Identify who your ideal customers are and how you’ll reach them.
- Launch and Grow:
- Launch Your Business: Put your plan into action and start selling your product or service.
- Build Your Network: Connect with other entrepreneurs, mentors, and potential partners.
- Embrace Your Mistakes: Learn from failures and use them as opportunities for improvement.
- Continuously Learn: Stay updated on industry trends and best practices.
- Develop Entrepreneurial Skills:
- Adaptability: Be flexible and willing to adjust your plans as needed.
- Resilience: Don’t be discouraged by setbacks.
- Problem-Solving: Be able to identify and address challenges.
- Communication: Effectively communicate your vision and ideas to others.
- Leadership: Inspire and motivate your team.
- Consider Your Circumstances:
- No Experience:
- You can still start a business with no prior experience by focusing on your strengths, conducting market research, and seeking guidance from mentors.
- Under 18:
- While you may need parental support, starting a business at a young age is possible. I personally know young entrepreneurs under 21, who are making a financial impact towards their college studies.
- Additional Tips:
- Network with other entrepreneurs:
- “Networking is crucial for sharing ideas, getting advice, and building relationships.”
- Take calculated risks:
- “Entrepreneurs need to be willing to take risks, but not without a plan and understanding of potential outcomes.”
- Be patient:
- “Building a successful business takes time and effort.”
Black entrepreneurs are experiencing significant growth and impact in the US economy. The number of Black-owned businesses has increased substantially, with Black entrepreneurs creating over 1 million jobs and generating over $165 billion in revenue. While challenges remain, Black-owned businesses are a growing force in the entrepreneurial landscape.
Key Statistics and Trends:
- Growth:
- From 2017 to 2020, the number of Black-owned businesses increased by 13.64%, exceeding the growth rate of all businesses.
- Revenue:
- Black-owned firms brought in an estimated $141.1 billion in gross revenue in 2020, an 11% increase since 2017.
- Job Creation:
- Black-owned businesses have created over 1 million jobs and generated over $165 billion in revenue.
- Financial Impact:
- The median net worth for Black business owners is 12 times higher than Black non-business owners, according to the University of Nevada, Las Vegas (UNLV) study.
- Revenue Growth:
- Black-owned firms’ gross revenue soared by 66% between 2017 and 2022, according to the Pew Research Center.
- Challenging Financial Conditions:
- The profits of 28.4% of Black business owners are negatively impacted by access to capital, with Black entrepreneurs being almost three times more likely than Whites to report this impact.
- Black Women Entrepreneurs:
- Black women are the fastest-growing group of entrepreneurs, with their businesses experiencing significant revenue gains and job creation.
- Lack of Access to Capital:
- A significant percentage of Black business owners face difficulties accessing capital, which can hinder their growth and development.
- Importance of Mentorship and Networks:
- Black entrepreneurs often benefit from mentorship and networking with other entrepreneurs to overcome challenges and achieve success.
More than one-in-five Black adults in the United States say owning a business is essential to their personal definition of financial success, according to a 2023 Pew Research Center survey. While Black-owned businesses have grown significantly in the U.S. in recent years, they still make up a small share of overall firms and revenue, according to our analysis of federal data.
