10
Tips for Successful Real Estate Property Investment
By Rhiannon Williamson
Just because real estate prices seem to have hit a temporary
ceiling in many countries around the world, that doesn’t
mean that profits from property investments are hard to come
by.
Even
during a real estate market slowdown, stagnation or depression
profits can be made locally and overseas. This article shows
you the top ten tips that real estate investors apply to their
property portfolio building strategy to ensure success from
their investments.
1)
Research the curve - the concept of a property market cycle
existing is not myth it’s a fact and is generally accepted
to be based on a price-income relationship. Check the recent
historical price data for properties in the area of the country
you’re considering purchasing in and try to determine
the overall feel in the market for prices currently. Are prices
rising, are prices falling or have they reached a peak. You
need to know where the curve of the property market cycle is
at in your preferred investment area.
2)
Get ahead of the curve – as a basic rule of thumb, professional
real estate property investors seek to buy ahead of the curve.
If a market is rising they will try and target up and coming
areas, areas that are close to locations that have peaked, areas
close to locations experiencing redevelopment or investment.
These areas will most likely become ‘the next big thing’
and those who by in before the trend will stand to make the
most gains. As a market is stagnating or falling many successful
investors target areas that enjoyed the best levels of growth,
yields and profits very early on in the previous cycle because
these areas will most likely be the first areas to become profitable
as the cycle begins turning towards positive once more.
3)
Know your market – who are you buying property for? Are
you buying to let to young executives, purchasing for renovation
to resell to a family market or purchasing jet to let real estate
for short term rental to holiday makers? Think about your market
before you make a purchase. Know what they look for in a property
and ensure that is what you are going to be offering them
4)
Think further afield – there are emerging real estate
property markets around the world where countries’ economies
are going from strength to strength, where a growing tourism
sector is pushing up demand or where constitutional legislation
has been or is about to be changed to allow for foreign freehold
ownership of property for example. Look further afield than
your own back yard for your next property investment and diversify
that real estate portfolio for maximum success.
5)
Purchase price – set yourself a budget that will realistically
allow you to purchase what you’re looking for and profit
from that purchase either through capital gains or rental yield.
6)
Entry costs – research fees, charges and all expenses
you will incur when you buy your property – they differ
from country to country and sometimes even from state to state.
In Turkey for example you should add on an additional 5% of
the purchase price for all fees, in Spain you will need to factor
in an average of 10% and in Germany fees and charges can be
in excess of 20%. Know how much you will have to incur and factor
this amount into your budget to avoid any nasty surprises and
to ensure your investment can become profitable.
7)
Capital growth potential – what factors point to the potential
profitability of your real estate property investment? If you’re
looking overseas at an emerging market, which economic or social
indicators exist to suggest that property prices will increase?
If you’re buying to let out are there any indications
to suggest that demand for rental accommodation will remain
strong, increase or even decline? Think about what you want
to achieve from your investment and then research and find out
whether your expectations are realistic.
8)
Exit costs – if you will incur substantial capital gains
taxation liability if you sell your property investment for
profit, will that render the investment profitless? In Spain
a foreign buyer can incur up to 35% capital gains tax, in Turkey
on the other hand property sales are capital gains tax free
if the underlying real estate has been owned for four or more
years.
9)
Profit margins – what levels of capital growth can you
realistically gain on your property investment or how much rental
income can you generate? Work out these facts and then work
backwards towards your initial budget to work out your potential
profit margins. At all times you have to keep the bigger picture
in mind to ensure that your real estate investment has good
potential for profit.
10)
Think long term – unless you’re buying property
off plan and intending to flip it for resale and profit before
completion you should view real estate investment as a long
term investment. Real estate is a slow to liquidate asset, cash
tied up in property is not simple to free up. Take a long term
approach to your property portfolio and give your assets time
to increase in value before cashing them in for profit.
Rhiannon
Williamson is a freelance writer whose articles about property
investing and emerging real estate markets have appeared in
publications around the world. She is currently working on a
brand new property investment resource http://www.amberlamb.com/
Article
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