Factors To Keep in Mind When Venturing Into Real Estate

By Olivia Rahim | June 26, 2021

Real estate is a wide range of operating, investing, and financing activities to make money from tangible properties or cash flows linked to tangible properties. When it comes to real estate, factors such as location and money play a significant role. Apart from the two, there are a number of factors to consider as well. If real estate is your next new venture, you should consider the following facets.

The Type of Property

When deciding on the type of property to invest in, carefully select one that will give good returns and fits within your budget. It’s good to consult some experts to help you decide what you’re looking for and the purchasing process. 

For instance, maybe a turnkey rental apartment is your best bet to generate profits immediately since it’s ready to rent out. Also, if you’re buying the property, depending on the size of the land, it’s important to calculate cubic yard of concrete.

Budget

Before investing in real estate, you need to know the amount you’re willing to spend. A budget guides you on what type of property you can afford, as well as space and location. Your budget might be enough for a studio apartment, a two-bedroom apartment, or a stand-alone villa.

Thus, before you pick up your phone and call a real estate agency, sort your finances first and be realistic to avoid disappointments. Plus, be careful of any hidden charges you might need to pay to the agency, bank, or even for the property, like renovations, furnishing, and other permits.

Location

The amount you’ll pay for a particular property majorly depends on its location. Are you interested in a property situated in a central area, where it will be expensive, or are you looking for a suburban property with amazing views and offers plenty of space for the same price?

Depending on the location, you should be able to decide which property suits you best in terms of price, value, and purpose of investing.

The Value of The Property

Before you put your money on a specific building, get an estimated value of it, so you can evaluate if it’s worth it or not. You don’t want to buy a cheap property only to realize you’ll spend twice the amount on renovation and restoration. 

Get the estimated value beforehand, then decide based on the plans you have for the property.

The easiest way to obtain the property’s value is by asking around from other properties with the same characteristics in that area or assessing that property’s market value with the help of your agent.

Be Familiar with Real Estate Laws

Before making a vast investment, familiarize yourself with the laws governing the area you’re purchasing the property, including the taxes you’ll be paying. At this point, you will need to hire a law firm that deals with properties to take you through the entire process and the procedures you should take to avoid fines. 

You want to avoid finding yourself in inconvenient situations as much as possible because there is a lot of money involved.

The Type of Tenant

Very few residential real estate investors take into consideration the kind of tenant they want. Most are simply looking for anyone who can afford to pay their rent on time. However, there is more to a tenant than their ability to pay rent. 

Things like maturity, discipline, rental background, and honesty are essential qualities for your tenant. Set a date to interview the tenants before they can move to your property. It helps to avoid any problems within your residential investment.

Investment Purpose

Obviously, the purpose of investing in real estate is to make money, but you must have a plan on how you’re going to do so. Is the project meant to make you some quick cash, or is it something you’re looking to invest in for the long haul? Are you’re looking for a one-time deal like purchasing cheap homes, renovating them, then selling them at a higher price or do you plan to buy a property and lease it out for a long time?

Having a clear vision of what you want to do once you’re in the real estate business could help you generate some money either way. Plus, you will be able to focus your efforts to maximize your potential profits.

Have a Stable Income

Getting into real estate requires some financial commitment. When starting, it demands you to inject in more money than it will give back. Hence, you must have a stable income flow to help withstand any financial challenges between the period of purchase and the sale of the property.

Evaluate if you’re operating with surplus cash and make a projection of the next six months to see your financial situation by then. If your income is still stable during this period, then you’re financially capable of investing in real estate.

Be Patient

Once you have everything ready in terms of finances, you need to be patient while still searching for the right property. It might take some time before making your first purchase or selling it. Note that rushing the process can lead to mistakes like selling at a lower price than the market price.

Alternatively, you might end up paying more for a property than it’s worth. Do your research thoroughly on every property you visit. Once you have all the details, then now narrow down your options through the criteria you’ve deemed necessary.

The Real Estate Market Is Erratic

There is no blueprint of how real estate operates. It doesn’t mean because property values are going up in one area, this will last long. It could be that there is a factory awaiting construction in that area that’s driving the property prices high. In case the construction stops for unavoidable circumstances, the value starts to drop rapidly.

You might find yourself in a situation where you invested in a property that has been depreciating for the past ten years.

It Could Be a Safer Bet Than Stocks

Everyone is looking to put their money where the rate of return is high. For stock, it’s easy to lose an entire investment on a single downturn of the economy. On the other hand, real estate generally fares better over time.

Since land is a limited resource, owning it sets you at a better place because it appreciates gradually or exponentially based on your location. Rarely does a wrong turn in the economy affect real estate. So, expect the value of your real estate to always go up no matter the season.

Used As Leverage

It’s effortless to secure a huge loan by using your property as leverage. If you want to buy more properties, you can use your current property as leverage to get money to buy the others.

Provided the financing institution is sure of your ability to pay the loan, the procedure for acquiring the loan should be much easier. 

Conclusion

Since real estate investment is a long-term thing, you need to fully understand what you plan on doing with the property and any other plans you have for it. Otherwise, the above factors should help you in making any decision regarding property purchase.

Remember to have access to the right insurance cover in case of an unthinkable event. You can’t afford to risk losing an investment worth a fortune. Plus, it would help if you put in hard work to see positive returns, whether short-term or long-term. Lastly, it would help if you educated yourself on the ins and outs of real estate to understand what you’re getting into.