4 Features That Transform Real Estate Into Real Money
Real estate equals a real fortune, or at least, that’s what investors believe. In reality, it depends on the situation. For instance, it’s not unrealistic to expect a rental property to provide an ROI of $180,000 in profit over a decade. On the flip side, there are no guarantees you won’t lose everything you invest within a matter of months.
Real estate investment is about several things, including luck. However, getting lucky doesn’t mean you can’t do your homework and boost the chances of success in the process. The figures prove that certain features are more likely to result in greater revenues or a higher turnover.
As always, the trick is to figure which localized elements demand the best resale value, and to present them to buyers or renters with a neat bow attached. Yet, what if there were specific features that were profitable across the board? That would make life ten times easier. The good news is, they exist. The bad news is, they aren’t always accessible.
Regardless, it’s better to know about them so that you can include them within your next project than it is to be ignorant and miss out on potential funding. Carry on reading to learn more.
It’s tempting only to factor in the building when investing in property. Let’s face it – it’s the money maker. The exterior and interior are the two facets that determine how much money you make, which is why you focus on them intensely. Everything else kind of goes under the radar, including the land.
Firstly, you shouldn’t assume what you see is covered by the agreement. There are plenty of instances where a garden, for instance, or a driveway, is a separate entity. As such, it won’t belong to you when you sign on the dotted line. Double-checking the fine print and referencing the blueprints should limit the damage.
Secondly, real estate investors struggle to comprehend the potential of open space. Land for sale is at a premium currently since the world’s population is at its peak, and more people are in the market for housing. With land, you can do two things – build and sell the properties for extra profit, or make a deal with a contractor.
Either way, the ball is in your court, meaning you have the potential to take an investment to the next level. However, you need to own the land.
A building permit directly relates to the resale value of the land. Without it, you can’t build, period. Therefore, your bargaining power and earning potential are much lower. Still, a professional contractor won’t mind too much because they have the contracts. In short, they won’t buy unless they know they can make money.
So, why is permission important? It’s down to the fact you don’t have to build new properties to secure a larger slice of the pie. A straightforward renovation is enough to add thousands of dollars onto the valuation of your home. Suddenly, through an extension, you have positive equity that takes your ROI through the roof (figuratively speaking!).
There’s a catch – you can’t build without authorization. Some projects don’t require a permit, such as those that extend on lower levels and move in straight lines, yet lots do, and you can learn more here. The thing to keep in mind is that if the permit is already granted, there’s nothing to worry about.
Permission rarely gets rescinded, which means you can invest with future renovations in mind. Still, you need to be careful since permits aren’t created equal.
Yes, the location is paramount for investors. With the help of fantastic transport links, low crime rates, and top-quality schools nearby, you’ll be able to sell or appeal to renters. Although this is true, there is more to the equation than meets the eye. Often, it’s the big-small stuff that flies under the radar and evades real estate investors.
For example, do you consider the vacancy rates of the neighborhood when searching for potential rental properties? Most people don’t, and as a result, have to stump up the cash when the low demand leads to a lull in tenants. High rent rates are essential as not only do they enable you to earn more, but they highlight the popularity of the area.
Another location feature you shouldn’t dismiss is the climate. Do you wonder why Florida and California are on owners’ wishlists, or why island life causes jealousy? It’s not because the properties are cheaper or constructed better, not at all. It’s the weather.
When people imagine their dream home in their head, they picture a balcony overlooking the ocean as the sunsets. By playing into this notion, you’ll increase the odds of selling or renting your property to applicants who want the location as much as they want the building itself.
Two things never change – death and taxes. The latter should always be small, for you and anyone interested in buying or renting your property. The first thing to look at is how much you’ll pay in property tax as high rates will eat into your bottom line. On average, it’s around 3%, yet it differs state-to-state.
Also, not to be morbid, but you should consider inheritance taxes or capital gains levies. The latter is the profit you make on anything above a certain threshold. Obviously, taxes impact buyers, too, as they won’t want to take on your responsibilities.
On the other hand, renters are worried about different expenses. For example, there could be a high rate of tax to the local authority for general maintenance, such as landfill disposal and road repairs. The monthly costs could be enough to encourage them to search elsewhere, so it’s wise to factor in the price of living in the house whether you plan on moving in or not. The good news is, the amounts are decided at a local level. Therefore, the location determines the price as there are good and bad states for property taxes.
If your investment property contains the above, you could turn real estate into real money.