The fact that real estate prices have temporarily peaked in many countries doesn’t mean that property investments won’t generate profits. It is still possible to make money locally and overseas even when the real estate market is slowing down, stagnating or in a depression. In this article, we present the top ten real estate investment tips from real estate investors apply to their property portfolio building strategy to ensure their investments succeed.
1) Research the curve
The concept of the existing real estate market cycle is not a myth, it is a fact and is generally accepted to be based on a price-income relation. Check the recent historical price data for properties in the area of the country you’re considering purchasing in and try to determine the overall feel in the market for prices currently. Are prices increasing, decreasing, or peaking? You should be aware of where the real estate market cycle curve is in your preferred investment area.
2) Buy ahead of the curve
Professional real estate property investors try to buy ahead of the curve as a basic rule of thumb. During a rising market, they will target up and coming areas, areas near destinations that have peaked, or locations that are undergoing redevelopment or investing. The areas above will most likely become the next big thing, and those who invest before the trend will stand to benefit the most. Many successful investors target areas that enjoyed the greatest growth, yields, and profits early on in the previous cycle, as these areas are likely to be the first to become profitable again as the cycle starts to turn.
3) Know your market
Are you buying property for yourself or someone else? Are you purchasing real estate to rent to young executives, renovate and resell it to a family market, or purchase real estate for short term rental to tourists? Know your market before making a purchase. Understand what they are looking for in a property, and make sure that’s what you’re going to offer.
4) Think further afield
Emerging real estate markets are emerging around the world where economies are booming, tourism is booming, or where constitutional legislation has been altered to allow foreign freehold ownership of properties. For maximum success in your next real estate investment, look outside your own backyard and diversify your portfolio.
5) Purchase price
Make sure that the budget you set is realistic and will allow you to purchase the property you want while profiting from that investment through capital gains or rental yield.
6) Extra charges
You will have to pay fees and charges when you purchase property – they vary from country to country and sometimes even from state to state. In Maharashtra, for example, you should add on an additional 5% of the purchase price for all fees, in Madhya Pradesh, you will need to factor in an average of 7.5% and in Kerala fees and charges can be in excess of 8%. Know how much you will have to incur and factor this amount into your budget to avoid any nasty surprises and to ensure your investment can become profitable.
7) Capital growth potential
How do you determine the potential profitability of your real estate investment? If you’re looking overseas at an emerging market, which economic or social indicators exist to suggest that property prices will increase? If you’re buying to let out are there any indications to suggest that demand for rental accommodation will remain strong, increase or even decline? Think about what you want to achieve from your investment and then research and find out whether your expectations are realistic.
8) Exit costs
If you are subject to a substantial capital gains tax if you sell your real estate investment for a profit, will this make the investment profit-less? In Spain, a foreign buyer can incur up to 35% capital gains tax, in Turkey on the other hand property sales are capital gains tax-free if the underlying real estate has been owned for four or more years.
9) Profit margins
What levels of capital growth can you realistically gain on your property investment or how much rental income can you generate? Work out these facts and then work backwards towards your initial budget to work out your potential profit margins. At all times you have to keep the bigger picture in mind to ensure that your real estate investment has good potential for profit.
10) Think long term
Unless you’re buying property off-plan and intending to flip it for resale and profit before completion you should view real estate investment as a long term investment. Real estate is a slow to liquidate the asset, cash tied up in property is not simple to free up. Take a long term approach to your property portfolio and give your assets time to increase in value before cashing them in for profit.
We hope you have got some useful tips from this article and it will help you to invest in better properties in the future. If you are interested to invest in properties near Mumbai & Pune then we have some good projects for you. Do check our ongoing projects.