10 Smart Tips for Investing in Real Estate
According to the experts investing in real estate is more profitable as compared to the investments made in commodities, currencies, precious metals, shares and stocks. But real estate investing is more difficult as compared to the other assets. This is why many people have lost their money while investing real estate. As a real estate investor you need to learn about the factors that increase or decrease the profit margin. Here are the top 10 smart tips for investing in real estate.
Know about different investment options
As an investor you should know about the three types of real estate investments. Firstly you can invest in real estate as a buy to let investor. Secondly you can invest in the real estate projects. Thirdly many investors buy the real estate shares like the normal shares. Just learn these options and select the one which is most suitable for you depending on your circumstances.
Check the market situation
The market condition has huge impact on the real estate prices. Always prefer to buy a property in buyer’s market. This is because in buyer’s market there are more properties than the buyers due to which buyer gets property at affordable rate. Similarly another thing to watch is the inter bank interest rate. The high interest rates mean low property prices where as low interest rates mean high property prices. Therefore buy property when interest rates are high and sell when interest rates are low.
Plan your budget carefully
Investing in real estate without planning a budget is suicidal. Thoroughly review your budget as it has huge impact on the returns. Check your investing options like buying a home with cash or mortgage. Ideally you should buy properties with cash. But if you are buying a home with a mortgage, then calculate the monthly repayment and other expenses.
Consult a reputed estate agent
If you are a beginner who has no experience of real estate investing then you should consult an estate agent. Realtors are experts in real estate and they know the best investment options according to the different areas. Just discuss your budget and preferred type of real estate investment. The estate agent will show you many investment options. Thoroughly review each option and select the one which is less risky.
Select the prime location
Location is the single most important factor that increases or decreases the profit margin. As an investor you should never compromise on location. Most people prefer to live near to work. Whereas others prefer the areas with good schools, hospitals, commercial centers and transportation links. Always keep in mind that prime location homes have high resale value. Therefore never compromise on location.
Select the right home
Finding the right home is very important for real estate investment. As a buy to let investor you should know that most people prefer to rent a 2-3 bedroom home. Very small or very large homes are not suitable for investing as these properties have low demand. At the same time it’s very hard to sell a very large home as it has low resale value. People also prefer homes that have small gardens and store rooms.
Visit many properties before investing
The real art to invest in real estate sector is to buy an affordable home. You should never fall in love with a single property or home for investing. Falling in love with a home will increase the purchasing cost as seller will try to sell it at high profit. Always visit many homes before the final move. This will help you in buying a home which is in good condition and is affordable.
Carefully inspect the home
Buying a home has many hidden costs. To invest in real estate you should thoroughly inspect the home. Look at the structure of the home and its finishes. Home inspection has two major benefits. Firstly it will give you the ideal of the renovation or repair costs. Secondly it will help you in negotiating the right price. You should deduct the repair costs from the home price as later you have to spend money on the renovations.
Negotiate to bring down the price
The most successful investors are expert in negotiating the home price. Price negotiation is an art and you should master it. As an investor you should be a hard negotiator. Keep it in mind that seller will try hard to sell the home at a profit but as a buyer you should negotiate to the last minute to bring down the price. If you buy home at a high price, your profit margin will be low.
Understand the One percent (1%) rule
Most investors buy homes according to 1% rule. The meaning of 1% rule is that monthly rent of a home should be 1% of the buying cost. For example if you buy a home for $100,000, the monthly rent should be $1000. The 1% rule shows the high rental yield. If you are buying a home for buy to let investment, then look for the homes that have high rental yield. Advantage of 1% rule is that you can recover your investment amount in less time.