5 Things you must consider before Investing in Real Estate
The best investment one can make in this world is the one that appreciates. Real Estate is a lucrative investment where one is assured of massive profits after gets into it. But the gains will only be realized if you invest carefully and sharply. Investing in real estate is easier than you think; using proper real estate education and investment strategies, you'll become among the most reputable real investors in the globe.
In this article am going to look into the factors that one should consider before investing in real Estate and some benefits associated with the investment.
1. Property Management
Property management is the basic knowledge that each person who is interested in real Estate must-have. Being a landlord can be engaging and time-consuming and, as a result, may hinder one from engaging in other income-generating activities. But this should not worry you since today one can hire a third party property manager.
Business management helps you remain in control of your property and ensure that your clients are happy. It will ensure that you’re free from legal obligations, you'll be able to buy other property, they will manage tenant issues, sales and agreements, and repairs.
2. Annual Expenses
Before you make any investment, you should assess the expenses that will be accrued after the purchase. By analyzing the costs, you can know what to expect that is any negative impacts and cash flows.
There are two types of expenses that you should know about. These are the;
· Fixed payments; these are the costs that are a routine and don't change. For example, the annual property taxes, insurance, repairs, and maintenance cost, and also the cost of management.
· Variable expenses; they are costs which are unplanned for, the miscellaneous fees. They may include the repairing of broken water heaters, air conditioners, roofs, or even broken windows. These costs will occur at any time.
3. Property Valuation
Everything goes down to whether or not you’ll get the right property valuation. The correct property valuation ensures that you don't end up paying more for a property. Property valuers come at a price but will most definitely give you the value for your money.
They do come in handy, especially if you’re into buying and selling the real estate property. They minimize the losses that you can incur when you’re investing.
4. The 1% Rule
When investing in real estate, you should put the 1% rule into consideration. The rule implies that your monthly rental income must be at least 1% of the initial price of the property. When you buy our property at the cost of $200,000, then you should be expecting to gain at least 1% of the value as rental income.
The 1% rule should be implemented by anyone who is interested in becoming a real estate investor and is interested in purchasing a rental property. If you don't want to use this rule, then ensure that when you invest in real estate, the neighborhood is good, and the growth rate is high or has prospects of growth.
5. Know the Mathematics
As I end the article, I’ll discuss what I believe will be a significant impact on your investment. Knowing your financial position will go a long way in ensuring that you buy the property at a low cost or at an affordable price, after which you stand to benefit the more from it. You should keep in mind that when you buy a property at a high price, the feasibility of your investment is gravely influenced.
Before investing in real estate, you ought to know the most critical metrics that are associated with the valuation of property:
a. The return on investment; nobody throws his money in a well, and as such, we all need to get a return on our investments.
b. Cap Rate
c. Cash-On- Cash return
d. Total ROI
If you put all these factors into consideration, you will most definitely be on your way to being among the most significant investors in real Estate. Investing in real estate is a step in the right direction and is the best thing that one can do for him and his children.
Real estate investment is more favorable when compared to other investments like cars and airplanes because of several factors:
If you invest in real estate, you are exempted from several taxes, and you have the benefits that the other investors cannot have.
Real estate investment appreciates over time. And the property comes with the advantage that it is a tangible investment that has value and is more desirable when compared to cars and even stocks. It is not impacted negatively by the rapid change of currency or trade; its value will always be constant.
Real Estate can be used to secure mortgages and loans more quickly than other assets.
Real estate investment is a long-term investment and is profitable when you do it right. But it’s essential that you seek advice and consult widely before stepping into the field to avoid making losses.