10 Tips for Successful Real Estate Property Investment
Just because real estate prices seem to have hit a temporary ceiling in many countries around the world, that doesn’t mean that profits from property investments are hard to come by.
Even during a real estate market slowdown, stagnation, or depression profits can be made locally and overseas. This article shows you the top ten tips for successful real estate property investment that real estate investors apply to their property portfolio. Moreover, building a strategy to ensure success from their investments.
Top 10 Tips for Successful Real Estate Property Investment
What are the 10 tips for successful real estate property investment?
1. Research the curve
The concept of a property market cycle existing is not a myth it’s a fact and is generally accepted to be based on a price-income relationship. 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 rising, are prices falling, or have they reached a peak. You need to know where the curve of the property market cycle is at in your preferred investment area.
2. Get ahead of the curve
As a basic rule of thumb, professional real estate property investors seek to buy ahead of the curve. If a market is rising, they will try and target up and coming areas, areas that are close to locations that have peaked, areas close to locations experiencing redevelopment or investment. These areas will most likely become the next big thing and those who by in before the trend will stand to make the most gains. As a market is stagnating or falling many successful investors target areas that enjoyed the best levels of growth, yields, and profits very early on in the previous cycle because these areas will most likely be the first areas to become profitable as the cycle begins turning towards positive once more.
3. Know your market
Who are you buying property for? Are you buying to let to young executives, purchasing for renovation to resell to a family market, or purchasing jet to let real estate for short term rental to holidaymakers? Think about your market before you make a purchase. Know what they look for in a property and ensure that is what you are going to be offering them
4. Think further
There are emerging real estate property markets around the world where countries’ economies are going from strength to strength, where a growing tourism sector is pushing up demand, or where constitutional legislation has been or is about to be changed to allow for foreign freehold ownership of the property for example. Look outside of your own back yard for your next property investment and diversify that real estate portfolio for maximum success.
5. Purchase price
The 5th of the 10 tips for successful real estate property investment is to set yourself a budget that will realistically allow you to purchase what you’re looking for and profit from that purchase either through capital gains or rental yield.
6. Entry costs
Research fees, charges, and all expenses you will incur when you buy your property differ from country to country and sometimes even from state to state. In Turkey, for example, you should add on 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 be in excess of 20%. 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
What factors point to the potential profitability of your real estate property 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 will incur substantial capital gains tax liability if you sell your property investment for profit, will that render the investment profitless? You may have to look into using Monetized installment sale or rolling the profit into 1031 exchanges or opportunity zone fund investments if you are investing in US.
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 backward 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 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.
Conclusion
There you have the 10 tips for successful real estate property investment. If you want more information we got the 12 best real estate websites for real estate investors that you may want to check out!