5 Basic Points of Consideration while Making Investment in Real Estate
Too many investors, even those who have been doing it professionally for years, real estate investment is considered as a class of its own and all types of property investment are put together with equal risk. However, this is not strictly true as every real estate investment is influenced by local factors; this makes it impossible to look at every investment opportunity in the same way.
Investment in Real Estate
The most important point to realize is that every property investment opportunity needs to be assessed on its own merits. The factors which will influence its value and ability to be used will almost all be local factors; the local market and economy is what you need to consider before purchasing your next investment property. There are obvious benefits to property investment and you are probably well aware of these. In order to build a successful property portfolio you should also be aware of the following considerations:
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Transaction costs
Buying and selling property in the private market will come with high transaction costs when compared to other real estate investments. It is therefore; better to purchase multiple properties or a larger property which can be split. This will allow you to offset the transaction costs over more assets and minimize the impact of them.
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Ongoing costs
Property management is either time consuming or will involve significant costs if using a property management firm. Prospective tenants need to be checked, legal procedures need to be followed and rents collected. It will also be necessary to budget for yearly maintenance and servicing charges. The long term prospects of any properties will also need to be assessed regularly. The market is constantly changing and there are many local influences which you will need to be aware of.
This information must be used to decide upon the future of any property in terms of profitability and asset value. Keeping a close eye on this will allow you to react in plenty of time should you need to sell the property. This can be handled by a property management agency but many investors feel happier looking after this aspect them self; despite the time involved in doing so.
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Acquisition
To have a balance portfolio and minimize the risks it is essential to purchase a variety of properties in a range of different locations. This can be a time consuming and difficult process as many of these properties are purchased before a small investor can establish all the necessary facts.
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Leasing
The majority of businesses can be seen to rotate through a cycle of events and these can become predictable. Real Estate is no different. It has two, distinct cycles. The first is the leasing market; in short this is the amount of space available in real estate and the number of people chasing this space. When the demand for space outstrips the supply possible the rents will rise until construction companies deem it worthwhile to build more properties.
Secondly is the investment market cycle. This is also a supply and demand issue. Those who have the cash available to purchase a property are the demand side of the market. The supply is fulfilled by those people who wish to sell their property. If the demand increases this will increase the price of the supply and will entice more people to ‘supply’ their house for sale. If the demand decreases the supply price will suffer and this will reduce the available supply.
The two markets are separate but have some connectivity. A decrease in the leasing market will also show as a decrease in the rental market. This will make it less likely that investors will want to purchase additional properties as they may not be able to fill them.
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The Risk
It is incredibly difficult to quantify the risks associated with any real estate purchase. There is no definitive record which can be used as a benchmark to assess your portfolio and it can be hard to establish how well your real estate is performing as there are so many variables which need to be taken into consideration. For example, if you are looking for villas for sale in kalkan it is vital that you do your research before committing to any property.
Category: Investing
