Investing in real estate is often seen as one of the best ways on building a portfolio which is immune to the ups and downs of the general market. Whilst it is certainly true that property investments can provide lucrative returns it is also true that property values can go down and your portfolio can be seriously damaged. In order to ensure you make the most from your real estate investment you should ensure you considering the following points prior to committing to a purchase:
Knowing the potential rewards available in the property market is not the same as being ready to invest. You will need some funds available upfront to secure the right finance deal and you will need to commit to a long term investment. In a normal market real estate should be held onto for at least five years. Prior to investing you should do as much research as possible to ensure you understand the market.
You need to envision where you would like to be, one property or ten? Then you must devise a workable plan that will get you to your goal and stick to it. There are many factors which should be taken into consideration when devising your plan and you should always make an allowance for the unforeseeable.
There are several different types of property investment and you must be aware of them and which one suits your needs:
- Fixing and Flipping – this is a high risk approach. You will need to locate the right property which needs work doing and has the potential to sell for far more than the asking price. You will also need to either do the work yourself or involve contractors to repair and decorate. The risk is greatest as you do not know what expensive problems may be encountered along the way which can wipe out your profit.
- Rentals – Buying a property to rent often makes sense, there is minimal amount of outlay and, hopefully, just yearly maintenance to be completed. But, the property must be in a desirable area and near the right amenities. If it is not you will risk having the property empty – whilst still needing to pay the finance.
- Commercial properties – these are similar to buying a property to rent but tend to be large, industrial units. Tenants tend to be businesses which are usually more reliable and dedicated to the long term. Rents may be lower than the private accommodation equivalent but the risks are also lower.
It is essential to understand the area in which your potential property is situated. You must visit a potential property at various times of the day and different days of the week. Note the type of people living in a neighbourhood as this will be the type of people you will be renting to. You do not have to purchase a very expensive property in a high class area, these can actually be difficult to rent. But, you do need to purchase one which will be appealing to the average family.
Investing in real estate is more than just a deposit for a finance package. You need to be sure you understand the various charges and how they will affect your potential profit:
- Deposit needed for purchase – working this figure out will involve sorting the finance for your purchase. A mortgage is the usual route although it is possible to find investment bankers or to fund the purchase yourself.
- Repairs and maintenance
- Legal Fees
- Accounting fees (if required) – this can be done by yourself although it is a complex field. You must be certain that you are capable of doing this properly.
- Eviction costs (if required)
- Capital for improving the house
- Utility bills, including water and sewerage
- Management charges (if required) – this is another role which can be fulfilled by yourself but it is time consuming. Prospective tenants will need to be checked and you will need to handle all complaints and vacancies promptly. A good management team will charge but will handle the day to day affairs for you.
The location of your property should also play a part in many of the decisions you face. It is possible to buy villas in Antalya in a cheaper area, but will it be attractive to tenants? It will also be more difficult to manage but it may be a better route into property investment and is one which is worth considering.
By Charles Goodwin and PropertyTurkey.com!