As Franklin D. Roosevelt once said, “Real estate is something that doesn’t get stolen, lost, or carried away.” It is also one of the world’s safest investments as long as you buy sensibly, pay for it in full, and manage it with reasonable care.
This quote from the 32nd United States President perfectly sums up the reasons to invest in real estate. But of course, you cannot just go ahead and invest in the first property you see. To fully reap financial rewards and benefits, there are several things to consider before investing in real estate:
Before you even think of investing in a real estate property, the first thing you should do is determine your budget and how much you are willing and ready to spend on this investment.
Setting a budget will not just help you identify the specific type of property your money can afford. It also makes it easier for you to narrow down your options in terms of location and space.
When you know your budget, you can also get a better understanding of whether you can afford a standalone villa, a two-bedroom apartment, or a studio apartment.
So before you pick up the phone to contact a real estate agency, make sure you sort out your finances first and determine how much you can spare. Doing so will help you set more realistic expectations for the kind of investment you can make.
As you calculate your budget, you also need to consider any hidden costs you may have to pay to banks and agencies, as well as other costs like furnishing, renovating, or choosing a rental-ready property.
If you plan to buy a property solely for investment purposes, the ROI, or return on investment, is one of the most important things to consider. Try to ask yourself if it is possible to rent it out right away or how long it might take to prepare it for your plans.
It is also important to consider your expected profit so you can gauge whether the property is the best investment choice for you or not. Aside from this, another critical element to consider is the appreciation of the property you plan to invest in. This appreciation will determine if it is worth taking the risk. It is also a key factor in preparing a proper plan.
Determining what you plan to do with the real estate property can make a big difference in the specific type of property you can buy and where to buy it. For instance, if you plan to transform it into an office, the property must be located in a specific area.
On the other hand, if you want to turn it into a commercial space, you will require a much bigger area. Identifying your purpose can help you decide properly and get a clear vision of what you are looking for. As a result, you can narrow down your available options to find the one that best suits your specific needs.
Many factors are determined and influenced by the property’s location. Do you prefer a central location that is more expensive? Do you want a suburban property that offers a scenic view with lots of space for a similar price?
These factors will vary depending on the location and can help you reach a decision based on the purpose of your investment, the type of property you are looking for, the property value, and the price.
Aside from considering your budget, it is also important to determine the most suitable payment plan for you. Can you get the necessary liquidity if you apply for a bank loan? How long do you need to pay for the loan? What kind of risk can you handle?
All of these factors are critical so that you can get a thorough understanding before you take this big step, especially if you are unsure if the property will even be worth it or not.
There are instances when you might discover that it is best to pay for a property in installments instead of a single lump sum. This is because it gives you more flexibility in generating the required cash flow without needing to pay the bank preposterous amounts in interest.
Getting the estimated value of the property can also help you determine if it is worth it to invest in it or not. It would be pointless to buy a cheap property just to discover that you need to spend large sums on renovation and restoration alone.
Always ask for an estimated value beforehand and decide according to the plan you have for the property. To do this, you can ask about other similar properties in the area with the same characteristics you are looking for.
You can also go through ads or ask your realtor to give you a market value for the specific type of property you are looking for in a certain location. Doing thorough research can help you reach a more valid decision and even open doors to better alternatives.
Real Estate Laws
Real estate is not a small investment, so you have to be familiar with the local laws in the area where you plan to buy a property. You also need to know more about the taxes you have to pay.
In such cases, it is always best to work with a lawyer who knows the ins and outs of the place and can give you a walkthrough of the whole process as well as the procedures you need to take. This way, you can stay away from inconvenient situations or avoid paying hefty fines, particularly in terms of taxes.
Type of Property
You must exercise caution when selecting the type of property to ensure that it will be a good investment. However, it should still fit into your set budget. For example, a turnkey rental apartment may be your best choice if you want to generate profit immediately since it will be ready to rent out.
But remember that every type of property has its own guidelines and terms, which makes it important to determine what exactly you are looking for ahead of time.
Be sure to understand and remember these crucial things to consider before investing in real estate to make the most of your money.