Real Estate Investment – Tricks & Tips Revealed
By Magnolia Realty | May 4, 2020
Real estate investment is considered one of the most profitable investments among all investment tools. It’s not only a great long-term investment tool but also generates passive income. Moreover, even in a very weak market environment, real estate is a safe investment because the value will increase over time. The primary objective of real estate investment is to put money in real estate whether land, residential or commercial properties and allow the money to increase in the future. The study shows the profit or return from the investments generally covers the risk, taxes and other costs of owning the real estate.
4 Ways Investors Make Money In Real Estate Investments
Property Value Appreciation
The value of a property depends on multiple factors. Considering the current scenario, the residential property value is in an uptrend because the demand is high and other investment tools tend to fail. The value around a property increases because of a number of factors such as:
- The property becomes scarcer or busier.
- Essential facilities in and around the property facilitate buyers to invest in it.
- Upgrade the property to make it more lucrative to potential buyers.
- Certain internal factors such as low buying price, facilities given by developers etc
Cash Flow Income
Cash flow in real estate investment mainly works in ready-to-move-in properties where the investor focuses on purchasing a property such as apartments or office space so that a stream of regular cash comes from tenant rent. The cash flow income can be generated through residential apartments, storage units, office spaces, retail establishments and rental houses.
Real Estate Related Income
Real estate investment can also be indirect when an agent makes money from commission on properties that he or she has helped clients buy or sell. Some real estate management companies also invest in real estate because they get regular cash flow in the form of rents in exchange for running day-to-day operations of a property.
Real Estate Ancillary Industry Income
Some ancillary industries such as vending machines in office buildings, laundry facilities in rental apartment communities, and others are benefitted from the investment. In effect, they act as smaller business units within a bigger real estate investment, earning money from a semi-captive collection of customers.
Top 5 Important Tips On Real Estate Investment
Know the cost, calculate the numbers
Real estate investment is not cheap but you have some liquidity and willing to take a loan, the investment can be worth it. There are other expenses you need to consider before investing such as basic maintenance, yearly upgrades, club membership, taxes, utilities etc. Everything has a cost, so be good at numbers and be sure before jumping in.
Type of property selection
If your property investment is purely an investment tool then you need to decide which type of property to invest in. If your intention is to invest for regular cash flow through rental then you must have proper research on the property, surrounding areas and future prospect of it. If you are not interested in a residential property then you can opt for commercial option. Before investing, clear your goal and decide a full-proof plan.
Check out the location
Location is one of the key factors in real estate investment. Check the market value of the property, research the competition, evaluate the future prospect and perform your due diligence. Other factors such as community around the property, proximity to popular attractions and lifestyle sometimes play important roles in appreciation of value.
Keep in mind the growth factor
The goal of your investment is to sell your property for more than you paid for it. So, it is important to look at tiny aspects of your property. Increase your property value by simple upgrades, simple furnishing, proper maintenance etc.
Another important thing is to maintain a list of contact that will help you with your investment. Who are these contacts? These contacts are property managers, salespeople from developers, property agents, a lawyer and money lenders. Also, people like local plumbers, electricians, pest control experts, contractors etc. are also quite important people.
Pros and Cons of Real Estate Investment
- The risk level is low compare to high return investments like a stock market
- An excellent source of regular cash flow
- A good tax-saving tool
- In term of long-term investment, property investment tops the chart
- Not a very good investment for a quick and short-term result
- Demand a good amount of liquidity to invest
- Dealing with lots of factors such as tenants, maintenance, taxes and others
Real estate investment when done properly, can be an excellent tool to build nest eggs. It is therefore important to take time to think and perform due diligence before finalize a project. Be sure you have a goal, proper strategy and enough liquidity.