How To Make The Right Decision For Your Real Estate Investment
“More than 89% of US citizens are interested in investing their money in real estate,” revealed a recent survey by Better Homes and Gardens® Real Estate. Moreover, 96% of the people who actually invested in real estate affirm that real estate investment helped them achieve great financial gains. These high stat reports attract a large number of people to invest in real estate and gain profits. However, success in real estate investment is not a cakewalk; there are many things that demand undivided attention so that you invest in the right property and get good returns. To help you make the right decision for your real estate investment, I have enlisted some important points that you should keep in mind while making your investment move.
Do Your Homework
- Know Your Real Estate Interests
Before making any real estate investment, the first thing that you need to understand is what your real estate interests are. Keeping your budget in mind, decide where you invest your money, whether in commercial property or residential. Once you know how much and where you want to invest focus on that particular type, get in-depth knowledge and gain high profits from the property.
- Gain Market Knowledge
Making real estate investment without the necessary market knowledge is like trying to cook a dish without knowing its recipe. You need to study the market where you plan to invest, know its current price, get insight on the property trends and then only can you know when and where to invest so as to get higher returns. This knowledge would keep you abreast about the current property rates, consumer spending habits, mortgage rates and what not to let you make effective plans for the future.
- Develop A Game Plan
Like a business plan, your investment game plan should have a pre-set goal that you want to achieve along with the steps involved in attaining the target. Don’t forget to keep your investment goals realistic and achievable. Also set a time frame for achieving your goals while, at the same time, assessing the risks involved in this investment.
Check Location Potential
- Be Watchful Of The Potential Infrastructural Development
The best way to know, whether an area would be up and coming in terms of property prices, is by checking the infrastructure development of the area. Check out signs like road construction, setting up of educational institutes, healthcare facilities, new transportation means or shopping centers in the area as these are some of the catalysts that indicate quick appreciation in the real estate value of the area.
- Know The Neighborhood
Not just the market knowledge, an in-depth knowledge about the neighborhood is also indispensable for your real estate investment. Take a stroll in the location and gain insights about the local pricing of the area. You would know whether you are making the right deal by investing in the property or not.
- Join Local Investment Clubs
Joining a local real estate invest club lets you network in a community of other investors, contractors and mortgage brokers while educating you about the new trends in the market. In the club meetings, people share their own stories and experiences that provide you an understanding of the real world. Join your local REI club now to get better insights on the business plans of successful investors.
- Join Online Forums For Expert Suggestions
The game plan that you have created or the location that you have finalized as per your budget should be reviewed by experts to get positive assurance. There are many online forums that let you network with the real estate investment experts who can give you suggestions about your game plan, property location, and pricing. Get in touch with these experts through online forums to make a profitable investment.
Know Legal Nitty-Gritty
- Invest In Low-Tax Property
While searching for property to invest, one thing that needs to be kept in mind is the property tax. Properties with lower tax are always a positive sign for profitable investment. The reason being simple- low-tax properties are always higher in demand, thus attracting more buyers and resulting in increased value over time.
- Search For Tax Benefits
While commercial properties do not enjoy any tax breaks on the interest or principal amount, residential investors can search for an array of tax benefits before choosing a property. While some may avail tax and interest deductions, others may get depreciation write-offs for their investment property. It is advisable to consult a good tax advisor to claim your tax benefits before making the big move.
- Get Mortgage Approval
The next thing to do is to get mortgage approval. The quicker you get approved for a mortgage; the lower would be the locked-in interest rates. Remember to pick the right type of mortgage that suits you and try to get your hands on Interest Only loans to increase tax effectiveness of your investment. Not just that, a pre-approved mortgage makes you financially able, thus making you a preferred buyer in the eyes of the seller. A mortgage pre-approval also help you know the amount you can spend on the investment, thus acting as a filter to your search.
Estimate The Profits And Outcomes
- Pre-Plan An Exit Strategy
First and foremost; you need to have an exit strategy for your real estate investment business. While people feel that thinking about the end is not important in the initial stages, I suggest that pre-planning an exit strategy is indispensable for successful investment. You need to know how long you seek to keep the property, how do you plan to sell it off and while selling, what type of buyer would want to invest in it. Keep these points in mind for profitable investment.
- Know The Risks
Before making any real estate investment, you need to understand the fact that real estate investment is nothing less than mutual funds; it comes with its own set of risks. The market may fluctuate at any time and you may lose all your capital. However, that does not mean you stop investing in real estate. You have to chalk out all the risks, in terms of financing, legalities etc., and understand them beforehand to manage and reduce the risks smartly.
- Find Out The Rental Value
Most of the property investors plan to put their properties on rent after purchase. To fetch long-term profits, try to find the rental value of the area before making any investment. You can try the “1% Rule” to calculate whether the property would yield profits or not. This rule simply states that the monthly income you produce through rents must be equal to 1% of the entire property value. If the rental value fits the “1% Rule”, the area is a good site for investment.
While real estate continues to be one of the most lucrative ways to invest and get good returns, but at the same time it is a dynamic sector and in order to achieve higher profits you need to pay attention to the points discussed above. Keep your eyes and ears open to all the changes taking place in the market and invest smartly for higher returns and make the right decision for your real estate investment.
Written by: S.K. Gupta writes for RealEstateIndia.com, one of the prominent real estate portals. He has a nose for the news associated to Realty Sector and loves sharing actionable advice with prospective buyers, reliable real estate agents, and investors enabling them to make smart, informed decisions rated to property buying and selling.