Why Real Estate Investing? Let’s checkout, The last downturn of the global stock market saw millions of ‘every day’ investors having their fingers badly burned. Overnight life savings were eaten away, retirement funds went into decline and the economic forecast for all of us who had any money invested in stocks and shares was gloomy to say the very least.
As a direct result investors in their thousands turned their backs on the rollercoaster stock markets and sought alternative asset classes in which to invest their hard earned money. This has led to a global boom in Real Estate Investing markets and property prices, and it has spawned a generation of budding real estate investors.
For those of you wondering whether it’s too late to venture into real estate investing or considering how best to make the most significant returns from property investment, here are 5 hot tips for successful real estate investment to set you on the path to potential profits!
1) Consider Investment Property Abroad for good Successful Real Estate Investing
There are many relatively untapped property markets in countries around the world that offer the real estate investor greater return on investment in the form of rental yields or short to medium term capital growth.
While major markets in the USA, UK, Australia and Europe are slowing down, there are emerging property markets globally that are hungry for investment and are proving to be highly profitable.
For example, in 2007 a number of countries are already aligned for accession into the European Union and as a result property markets in these countries are likely to benefit from greater numbers of visitors, more trade, increased investment into infrastructure and more stable economies. The likes of Hungary, Slovakia, Bulgaria, Croatia, Turkey and even Northern Cyprus are just a few examples of overseas destinations with emerging Real Estate Investing markets that may be worthy of your consideration.
2) Make Sure Your Plans Are Profitable for Successful Real Estate Investing
This sounds ridiculously simple right? Well, you’d be surprised how few people actually make sure their plans are actually sustainable and as profitable as they hope.
Examine any real estate market that you’re about to enter by firstly comparing property values across the city, state or region and making sure you know what your money will buy you. Then ensure that the rental yield you intend to obtain from your property is actually realistic or that the asking price you intend to set once you’ve renovated the property will be offered.
3) Never Assume Anything
This goes from assuming a house is structurally sound to accepting that tax laws won’t change – from believing your tenants when they tell you that they are house proud and honest to accepting the first builder’s quotation!
Do your due diligence on every single aspect of the process from ensuring the asking price for a property is fair to checking your tax returns before your accountant submits them for you. This is your investment, your future, your potential profit and therefore it is ultimately your responsibility.
4) Employ An Expert When In Doubt
Few people are a master of all trades therefore be prepared to acknowledge areas where you are far from being an expert and at least consider courting a second opinion. Again, this goes from checking out the structural soundness of a property to understanding the legal ramifications of letting out your property. If in doubt always double check – and if this means you have to call in an expert, make sure you call in an expert!
5) Set A Realistic Budget And Stick To It in Real Estate Investing
Whether you’re purchasing property to let out or buying real estate to renovate you need to sit down and add up every single area of projected expenditure to enable you to set a realistic budget with which to work.
Make sure you add in everything from having searches and surveys conducted, legal fees, accountancy fees, insurance costs, likely interest payments on any finance required, taxation, connection of utilities, marketing for tenants or buyers, real estate agency fees, and of course don’t forget to add on the cost of the property and the price of any renovation and refurnishing and decorating work required.
Spend time considering every single area where a cost will be incurred and detail every likely payment that will have to be made and you will arm yourself with a bullet proof budget and do all you can to ensure you encounter no nasty surprises along the way.
Points to Consider Before Investing in Real Estate
It is possible for someone who has no prior Real Estate Investing experience to get carried away by the lure of profits and invest in real estate which offers no returns. Real estate investment comes with certain risks and a beginner should keep the following points in mind before spending his/her hard earned money.
- Stay Patient – Buying a property is a time consuming affair, with most genuine property transactions taking a few days to be complete. While a number of real estate firms offer to complete formalities overnight, the fact remains that exhibiting patience can help you land a good deal. Jumping the gun can see you pay more for the property, or purchase one which doesn’t live up to your expectations. Also, sellers can delay projects, which could see your investment not offering any returns for a certain period, checking your patience.
- Research The Property – Doing your homework before you step out to look for a property is critical today. With a number of projects coming up, it can be confusing to choose the right real estate, for sellers are typically known for sweet talking buyers. The amenities on offer, the history of the construction company, the materials used, the area a property is located in can all play a role in determining the returns you get on your investment. Failing to research before buying could see you regret later, negating your investment.
- Check The Papers – The papers of a property are perhaps the most important factor one should consider, for it is possible for someone who is not acquainted with the real estate industry to get scammed into buying a property with fake papers. Buying a property without clear titles can lead to long drawn court cases or litigations, which essentially nullify the investment. All property papers should be checked by legal experts to authenticate them, for failure to do this could see you purchasing a property which could be mired in controversy. A number of times people sell properties below market rate, which should alert you, for such properties could have litigations or internal issues with the owner.
- Check Market Rates – Most local governments provide a guidance value to help investors know the rate of a property. Knowing the market rate can help you track local trends, ensuring that you don’t get scammed into paying a higher amount than what a property deserves. Researching market rates and working out developments could help you extrapolate the returns you could expect in the future.
- Talk To Neighbours – Talking to the neighbours is a good idea which most of us tend to ignore. This can help you get a first-hand perspective of how things are in a locality, helping you narrow down any problems or areas which could dilute an investment. Talking to them can also help you know the current market rates and see how the area has developed and the scope for future development. Given the fact that neighbours aren’t salesmen trying to sell you the property, one can get a clear picture of the real estate they intend to buy.
- Calculate Your Finances – It is important to calculate the finances you have in order to ensure that you meet certain goals. While it is easy to get loans from banks, calculating the interest and other factors is crucial.
- Remain Positive – It is important to stay positive while executing a real estate deal, for there are bound to be times when deals don’t fall into place. Remaining calm and composed while interacting with property sellers can help you get additional benefits.
- Negotiate – Negotiations are a key aspect of the Indian real estate system, as everyone is looking for a deal which will make them richer. Knowing the art of negotiation can help you save a lot of money and get additional freebies like parking spaces, furniture, etc.
- Consider The Risk Factor – Real estate investments are typically safer than other investments, but that doesn’t mean they are totally risk free. Legal hurdles and property disputes are extremely common in India and one should ensure that the property they are interested in is clear and minus the hassles.
Crowdfunded Real Estate Investing
If owning and managing your own rental property is not appealing to you, but you still want to grow your portfolio through real estate investing, crowdfunded real estate investing may be a better option for you.
When you participate in crowdfunded real estate investing, you are part of a group of people who pool their money with other investors, and then lend or invest that money with experienced rental real estate investment property owners.
You stand to profit from the experienced investor’s skills with a minimal investment of time with minimal risk, depending on the investment.
One of the benefits of this option is that you can track statistics online to review an investment’s earnings history information. You can also manage your investment online, and you will get a summary with year-end tax information as well.
Crowdfunded real estate investing is a very popular option because you do not have to search for property, get a mortgage loan, screen or manage tenants or manage the property. More importantly, someone else is responsible for the property loans. Your risk and workload are minimized, yet the potential for profit still exists.
Prior to crowd funding, private securities could not be marketed publicly under the Securities Act of 1933. As a result, it was difficult to get information about private securities investments unless you associated with wealthy real estate investors who invested in six-figure deals.
Today, crowdfunding gives investors access to a variety of investing deals, despite your background, resources, or level of experience.
While crowdfunding is an attractive option, you need to research the company and the options to make sure that the company is legitimate and also a good fit. You need to know the minimum investment amount to make sure that the deal will work for you. You will want to know how long they have been in business, as well as their guidelines for borrowers and investors. Lastly, you need to know the fees being charged for their service.
Understand The Risks Of Real Estate Investing
You have to understand the risks before making the investment. One of the key risks involved is buying a property and having to sell it at a significantly lower price due to market conditions or other conditions outside of your control.
Another common mistake includes the timing of purchases and sales may result in substantial losses or losing out in a deal or the market picking up ahead of your prediction forcing you to buy the same product that was available for a bargain at a premium.
If you’re owning the rental, maintenance and other large expenses can also be a challenge.
Be Aware of The Tax Implications
From the onset, you will want to be aware of tax implications of the real estate investment properties. One of the key determining factors is how the property is classified, and how it is used.
You do not want to part with a major chunk of the returns you earn from an investment as taxes. The one and the only way to ensure this is by understanding the tax implications of any property investment well in advance. An important part of how the property is classified is how the property is treated under rental real estate activities.
Go through the existing tax schedules and also get a clear picture about the varying rates that apply. Always speak to a tax professional if you have questions or concerns.