Any investment requires critical thinking, good planning, and extensive research. When it comes to investing in real estate, not only is a significant amount of capital required, but factors like choosing a strategic location are also critical.
It’s estimated that real estate generates around $9.5 billion globally as of 2021, and the numbers are expected to continue to grow to 2030 at a CAGR of 4.8%. Investing in real estate now could prove to be a good decision in a few years.
Recently, the real estate industry has undergone a remarkable transformation in terms of policy changes, financing, etc. Therefore, not only should you work with reputable companies like Costas Construction, but there are some crucial factors you should know for your success in the real estate industry.
10 Important Factors For Real Estate Investment
- Plan on Quick Delivery
If the raw materials are delivered on time, the construction process will end sooner. However, when the whole process of delivery is derailed the construction process is halted, and your project will take too long than expected.
Location significantly determines the profitability of your real estate business. If you build a property near spectacular scenery, amenities, green space, and a good neighborhood, you increase its value. And when a building is located near markets, highways, warehouses, or transportation hubs, its economic value skyrockets and provides a desirable return on investment.
When deciding on a particular location for your property, consider how the area is likely to develop. For example, you can buy a plot of land to build a residential property. But after a few years, the site will turn into a noisy, habitable manufacturing center. Always check the ownership of the land and find out about its planned use before deciding to invest.
- Property valuation
The value of your property determines the listing price, taxation, and insurance cost, among others. As you invest in a property, check cost analysis, income appreciation, and the element of depreciation. Know whether you can still maintain your property without typical sales. Create a property that won’t give you too much stress in management.
- Stick to Your Budget
After preparing an effective cost estimation plan, you must also be ready for unexpected expenses. When you stick to a professionally prepared budget, you’ll save a significant amount of money. To achieve financial goals for your property, cut down on unnecessary spending.
- Clear Debt/ Build a Good Credit Score
Lenders will always look at your credit status when determining whether you qualify for a house loan. Lower your debt-to-income ratio to get easy and fast loan approval at a reasonable interest rate.
- Know Your Goals and Priorities
Always take the house you want seriously. Along the way, consider what you expect after making such an investment. When you know the objective of building a property, you will be more prepared to make brilliant moves.
- Understand the Basics of Real Estate
Stay with others if you want to be a reputable real estate investor. Therefore, try surrounding yourself with trustworthy property managers and real estate agents. As you plan to invest in property, consult them for thorough guidance. Finally, remember to ask how you can convert your property into a profit-making venture rather than a loss-making investment.
- Compare New and Existing Property
New construction can be expensive, but it offers the flexibility to optimize it and includes modern amenities. Aside from the increase in cost, new construction also carries risks of delay and uncertainty in dealing with the unknowns from newly developed residential areas.
On the other hand, existing lots are practical because they already have improvements such as landscaping and utilities. They’re also usually cheaper and provide easy access to a lot.
If you decide to buy an old or new lot, here’s what you should consider;
- What is the reputation of the contractor that will build your property? (Check past projects)
- Existing properties should have legal title deeds, survey information, and a current appraisal report.
- Compare monthly maintenance costs, taxes, and outstanding fees for the existing property.
- Performance of the Real Estate Market
You should always try to buy low and wait to sell high in any investment. Indeed, the real estate market experiences market fluctuations. That is why you should be aware of the overall performance of the real estate market before investing in a property. Most importantly, track the mortgage rates to keep property financing costs low.
You will always know about the real estate market if you follow up with trends and statistics on home prices, home sales, mortgage rates, foreclosures, flipping activity, and property inventory.
- Create an Emergency Fund
Emergency funds play a critical role when you encounter unavoidable expenses that need to be resolved sooner before they turn into something terrible. Any financial planner will tell you that setting up an emergency fund is essential for any investor. However, there are debates about how much money you should have for emergencies. To be on the right track, ask your financial planner for expert advice.
Real estate investing is a great way to diversify your portfolio. However, before you invest in a commercial or residential property, there are many factors to consider, from location to your credit score to property valuation, to name a few.
In general, it’s always a good idea to seek advice from a professional and do enough research to ensure you fully understand the risks and potential rewards of investing. Real estate investing is a complex area, but if you pay attention to these important considerations, you can make informed decisions and increase your chances of making a profitable investment.