10 tips for a successful real estate investment
The fact that property prices appear to have hit a temporary ceiling in many countries around the world does not mean that returns from property investments are hard to come by.
Even during a housing market slowdown, stagnation, or depression, profits can be made locally and abroad. This article shows you the top ten tips that real estate investors apply to their property portfolio building strategy to ensure the success of their investments.
1) investigate the curve – The concept of an existing real estate market cycle is not a myth, it is a fact and it is generally accepted that it is based on a price-income ratio. Check recent historical price data for properties in the area of the country in which you are considering buying and try to determine the general sentiment in the market for current prices. Are prices rising, falling, or have they peaked? You need to know where the real estate market cycle curve is in your preferred investment area.
2) get ahead of the curve – as a basic rule of thumb, professional real estate investors look to buy ahead of the curve. If a market is bullish, they will try to target up-and-coming areas, areas near locations that have peaked, areas near locations undergoing redevelopment or investment. These areas are very likely to become the ‘next big thing’ and those who got there before the trend will stick around to make the most profits. As a market stagnates or falls, many successful investors focus on areas that enjoyed the best levels of growth, performance, and profits very early in the previous cycle because these areas will likely be the first areas to become profitable as the market progresses. cycle begins to turn positive. one more time.
3) Know your market – Who are you buying a property for? Are you buying to let to young executives, buying for renovation to resell to a home market, or buying a jet to charter short-term rental real estate to tourists? Think about your market before making a purchase. Know what they are looking for in a property and make sure that is what you are going to offer them
4) think further – there are emerging real estate markets around the world where countries’ economies are becoming stronger, where a growing tourism sector is driving demand, or where constitutional legislation has been or is about to be amended to allow foreign ownership freehold ownership eg. Look beyond your own backyard for your next real estate investment and diversify that real estate portfolio for maximum success.
5) purchase price – Set yourself a budget that allows you to buy what you are realistically looking for and benefit from that purchase, either through capital gains or rental income.
6) entry costs – research fees, charges and all the expenses you will incur when you buy your property – they differ from country to country and sometimes even from state to state. In Turkey, for example, you must add an additional 5% of the purchase price for all fees, in Spain you will need to factor in an average of 10%, and in Germany fees and charges can exceed 20%. Know how much you will have to incur and factor this amount into your budget to avoid unpleasant surprises and ensure that your investment pays off.
7) Capital growth potential – What factors point to the potential profitability of your real estate investment? If you are looking for an emerging market abroad, what economic or social indicators are there to suggest that property prices will rise? If you are buying to let, is there any indication that the demand for rental accommodation will remain strong, increase or even decrease? Think about what you want to achieve with your investment, and then do your research and find out if your expectations are realistic.
8) exit costs – If you will incur a substantial capital gains tax liability if you sell your investment property for a profit, will that make the investment unprofitable? In Spain, a foreign buyer can incur up to 35% capital gains tax, in Turkey, on the other hand, property sales are free from capital gains tax if the underlying real estate has been owned for four years or more.
9) profit margins – What levels of capital growth can you realistically get from your real estate investment or how much rental income can you generate? Work these facts out, and then go back to your initial budget to calculate your potential profit margins. At all times, you need to keep the big picture in mind to ensure that your real estate investment has good earning potential.
10) think long term – Unless you are buying an off-plan property and intend to sell it and make a profit before completion, you should consider investing in real estate as a long-term investment. Real estate is a slow asset to liquidate, cash tied up in properties is not easy to release. Take a long-term approach to your property portfolio and give your assets time to increase in value before cashing them out for a profit.