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 that real estate investors apply to their property
portfolio building strategy to ensure success from their investments.
1) Research the curve - the concept of a property market
cycle existing is not 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 holiday makers? 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 afield – 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 property for
example. Look further afield than your own back yard for your next property
investment and diversify that real estate portfolio for maximum success.
5) Purchase price – 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 – they 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 taxation liability if you sell your property investment for profit,
will that render the investment profitless? 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 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
Rhiannon Williamson is a freelance writer whose articles
about property investing and emerging real estate markets have appeared
in publications around the world. She is currently working on a brand
new property investment resource http://www.amberlamb.com/
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