10 Tips That You Should Not Ignore When Investing in Real Estate
When investing in real estate one acquires a property in order to sell it for a higher price, to rent it immediately, to repair it and then sell it, or to build (in the case of having acquired a land) and then sell it or rent it.
Experts consider real estate investing as a low risk, safe, and profitable investment.
Despite being considered as a safe and low risk investment, many people who have decided to invest in real estate have suffered great losses, either by having bought a poorly located property, not being able to find tenants, or having to make repairs or remodeling that which ended up being more expensive than expected.
The real estate coach Luther Ragsdale, who has a number of publications on this topic, advises you that before investing in real estate, you must consider the following points in order to make a safer investment.
1. Analyze well the property you intend to buy and the total investment taking into account the risk / benefit factors such as the location, the price, the state of the property, the need for repairs, the maintenance costs, the taxes to be paid, the necessary credit to buy the property and, above all, the possibility that the property may be resold or rented at a price that justifies the investment.
2. Think of long-term investment. Do not sell early. The investments in real estate are considered to be long term investments. That is why we must bear in mind that the profits could be obtained in no less than 3 years. Remember that the increment of the property value is time related and also depends of the real estate market condition.
3. Calculate the profitability of the property before investing. In order to find the best investment option, besides the profitability, it is also advisable to take into account other factors such as risk.
The formula to calculate the return of an investment is:
If you are not familiar with this topic, having a real estate coach on your side can be of a great help.
4. Diversify. It is important not to invest everything in the same market. Luther Ragsdale spots that if you invest in luxury real estate properties, you can buy multi-family houses or commercial real estate too, in order to diversify your investments.
5. Pre-sale is the key. Look for projects at pre-sale prices. This ensures you even more profitability when it comes to long-term sale.
6. Make sure that the property papers are in order. Hire a lawyer, a surveyor and notary to make sure that everything is in order. They will examine the property condition.
7. If you are going to rent. Make sure there are guarantees. Find all the references about the tenant.
8. When investing in something that is under construction, make sure that the construction company has bonds, so they will be the guarantee that the work will be finished.
You also get a copy of the construction license and the discharge permits for wastewater.
9. Be aware when investing in areas without potential growth. In a place where is a lot of supply the price does not grow, there are several factors that can determine the value growth between them: the construction of roads and the lack of planning to deal with the vehicular traffic load.
10. Always analyze the market. Before buying or lending money to a developer, market indicators must be considered. It may happen that rents have risen in recent years, but you have to know how big the potential is. If the rents are high but there are very few commercial premises, offices or empty houses, it is a sign that the area will still grow.
More information about real estate investing you can find on Luther Ragsdale's real estate blog.