Understand these 6 things before getting into real estate investing
Real estate investment can be a very lucrative way of making money, provided that you develop a calculated and methodical approach to it. Lots of first-time real investors bankrupt themselves by making poor investment decisions. The main reason for this is usually a lack of research and study.
Taking time to study real estate as if you were taking an exam on it is a very effective way of becoming a more successful real estate investor. Don’t rush into it. Before you can begin investing, you need to understand these six things:
One of the first things to think about when you are planning on getting involved in real estate investing is the location that you intend on investing in. Investing domestically isn’t always the best decision. Lots of people find that investing in property in Portugal or other parts of Europe is the best decision, especially now. Portugal specifically offers a Golden Visa scheme, which allows investors to eventually receive Portuguese citizenship, through sizable investments. Europe is the world’s third-wealthiest continent, and it is growing each year.
There are many places in Europe where you can buy very affordable property. This isn’t going to remain the case forever, however. As more foreign investors become aware of the property opportunities in countries like Portugal, you can expect to see more international interest.
Another thing to think about when you are planning on investing is the property’s value. If you don’t have a large amount to invest then you need to find a property within your budget. Generally speaking, you can buy derelict properties in desirable areas for very little. When you buy a derelict property, however, you must then renovate it, which can be very costly. This isn’t ideal for all investors, especially those on a restricted budget. However, if you think that you can handle renovations, then renovating derelict properties is perhaps the most lucrative moneymaking solution property investing offers.
You can also buy commercial properties in desirable areas usually for much less than you can residential property. You can then convert commercial property to residential property.
Another thing that requires serious consideration is investment purpose. What do you intend on doing with the property? What is meant by “investment purpose” is the property’s purpose, for example, is it a fixer-upper, rental investment, or a property for you to hold onto until property prices rise? You need to have a clear vision for the property before you invest in it. Lots of people rush into investing in property and do so without a clear vision, which results in them losing a lot of money.
Before you invest in a property, you need to pin down its investment purpose. In addition to pinning down its investment purpose, you also need to be clear about how much profit you stand to gain from it. If it is a rental property then sit down and calculate how much you will make long-term; if it is a property that you intend on renovating, then sit down and work out how much you are going to have to spend, and how much you are going to gain in return. You need to be clear about these things before you invest, otherwise, you could unknowingly end up in deficit.
You also need to think about your finances. How will you fund your investment? One method of funding one’s investment is to borrow money. You can borrow money from family, friends, or from loan companies and lending agents. Lots of first-time investors choose to borrow money from the bank, because interest rates are usually low, and fixed. Borrowing money is a very effective way of funding one’s investment because you are able to borrow much more than you ordinarily would. If you are going to borrow money, research interest rates and choose the best lender possible.
New or old?
You also need to think about whether or not to invest or new or old properties. In many cases, old properties are best if you are going to renovate because while you can breathe new life into a property and modernise it, you can still retain character features, which is desirable to property buyers. With that said, buying new property such as apartments, flats, and houses in popular developments is also very sensible, particularly if you are investing abroad and won’t be able to go overseas to monitor redevelopment.
Real estate investment, if done right, can be an effective way of making money and generating income for years to come. If done wrongly, then real estate investment can be a bottomless pit, where one loses all of one’s money. Study this article and take time to research investment, and you will be more likely to profit from it.