Real estate has always been the best investment option but it takes a lot to decide when and where you should play your first card. Real estate never lets you face difficulties in ROI but good planning can help you get maximum profit in minimal duration. Here are a few things that you should consider before investing in real estate.
1- Location
Most people say it’s all about the land and not location. It is wrong! It is all about location.
The axiom “location, location, location” still rules over the real estate industry and continues to be the most significant factor for lucrativeness in real estate investing. Closeness to amenities, green space, picturesque views, and the neighborhood’s position plays a very big role in elevating your property value. Property being located nearest to marketplaces, warehouses, transportation hubs, expressways, Educational institutes, hospitals, and commercial zones plays an important role in property appraisals.
You can collect information about the locality with the help of the internet and also by contacting the real estate agencies and authorized dealers of relevant places. You can also look at multiple places at the same time and compare the locality results to make a better and more beneficial decision.
2- Valuation of the Property
Evaluating the property before making a purchase is one of the most neglected yet important things to do!
The process of Property valuation is one of the most important factors for bankrolling during the purchase, listing price, investment examination, insurance, and taxation. All of the factors are highly dependent on real estate valuation.
Highly recommended real estate valuation methods are as follows:
Sales comparison method
Compare the most recent comparable sale prices of the same valued properties with similar characteristics. This method is used for the new and old properties that you are intended to purchase.
Price/cost/quote method
Compare the cost of the land and construction, minus the estimated depreciation value. This is how you can calculate the current cost of the property.
Salary/income/revenue method
This method is applied to the expected cash inflows of your family or business. Highly suitable for rentals and commercial purposes.
3- Investment Purpose
Determine the purpose for the highest ROI and long-term profit!
Determine the reason behind your investment. Are you going to use the property for yourself or use it to regulate the income flow? Ask yourself all the necessary reasons to understand the answer and then decide to invest in the property you are looking for.
One bad decision at the initial stage of investment can ruin your hard-earned money and lead to loss. You need to be sure about the reason you are investing. To make a better and clear decision, take a notebook and pen and write the answers to the following questions:
- Am I going to move into this property?
- Am I going to use this property for rental purposes?
- Am I going to mortgage this property?
- Do I have enough money to pay for the property in the easiest way possible?
- Is the property I’m looking to buy legally clear? (No allegation or stay orders on the property)
Once you have all of the answers in your hand, you will be automatically more aligned toward your final decisi
4- Possible Cash Flows and Profit Chances
Look for the most happening chances of profits and increasing cash flow before investing!
Cash flow is measured as how much of the money is remaining after all of the expenses. Once you have done investing enough, now it is your turn to see what your land is returning to you. An increasing cash flow means that you have made the right decision. While a negative cash flow may also happen but only in cases where the location of your investment property is not very suitable. You may have to look for the basic factors to increase the cash flow. Please read the following points for a better understanding.
5- How to look after Cash Flow
- Predictable income from rental resources (Highly helpful in increased inflation)
- Probable upsurge in inherent value due to long-term price rise.
- Benefits of devaluation
- Cost-benefit analysis of renovation before sale to get a better price
- Cost-benefit analysis of mortgaged loans vs. value appreciation
6- Be Aware of Financial Schemes
So many people are out there to trap you in good-looking bad financial schemes. Keep your eyes open!
Getting loans may help you for the time being but can be really hard to deal with over time. Sometimes even cause you bigger losses than the actual amount of borrowed money. This is why you should be careful about any kind of financial scheme you might go for.
Taking loans may seem very convenient, but they may cause you a big cost. You bind your future revenue to get efficiency today at the cost of interest on a long-term basis. Take a deep analysis and figure out ways to deal with such a big amount of loan. There are so many experts in Real Estate who are facing challenges with overcoming huge loans and are suggesting that one should not go for the higher amount of loans.
Make a rough estimate of your current and expected earnings shortly. This estimate would help you in deciding on your financial schemes for the entire investment project.
7- Latest Construction or Old Property
There is always something different about the newly built property and the property that was built for our ancestors.
Newly built properties habitually offer attractive pricing, customization features, and updated and latest amenities. But at the same time, there are also some risks including delay in completion, the difference between estimated and original costs, and the nonentities of a newly-developed area. Already existing and old-made properties offer huge opportunities, faster and rapid access, recognized improvements, and in numerous cases, decreased costs.
Things to consider before choosing between new or old property
- Review the previous projects and research the construction company’s reputation for making new investments with the same company.
- Evaluate property documents, latest surveys, and assessment reports for current properties.
- Study previous reports about monthly maintenance charges, payable dues, and taxes. Unpaid amounts like these can highly damage your cash flow.
- When you are about to invest in mortgaged/ leased property, find out if the property is being used for rental purposes or free market. Is the agreement about to finish? Are rejuvenation options favorable to the resident? Who possesses the furnishings?
- Double check the installed items of property such as the furniture, electric equipment, and fixtures.
8- Indirect Investments
Unplanned decisions are sometimes best but in Real Estate, rethink the unplanned!
Handling tangible properties over a long duration of time is not an easy task for everyone. You will come across a lot of alternatives that will allow you to earn more profiles with the same invested amount. Therefore, always look for multiple ways for investing in Real Estate. Look for the maximum options to do with the same amount of money at different locations. You never know what the real estate has for you in reserves.
9- Your Credit Points
Your Credit scores allow you to qualify for a loan, mortgage, or lease.
Your credit points have an impact on your capability to qualify for a loan, and it also influences the terms your moneylender offers. If you have a greater credit score, you may get more loans on flexible terms, which can add up to considerable savings over a long time.
10- How to Deal with Mortgaging Discrimination (If happens)
Mortgage loaning discrimination is unlawful. If you believe that you have been discriminated against on a different basis including gender, race, religion, nationality you hold, marital status, utilization of public assistance, physical disability, or age, there are multiple steps you can take to face this issue. One of the most recommended and easy steps is to file a report to the Police of your area
11- Complete Real Estate Market Stats
Look at the overall Real Estate market of your area before finally investing!
Along with other kinds of investments, it’s a good idea to buy low and sell high. Real estate markets vary every now and then, and it pays a little to be aware of the latest trends. It’s highly recommended and important to pay attention to mortgaging trends and rates so you can cut down your financing costs.
By following the mentioned steps, you can stay updated with the real estate market and cut down the costs:
- Overall property selling and purchasing ratio
- Policies and costs for new construction
- Complete inventory of property
- Mortgage ratio and costs
- Overturning activity
- Foreclosures
