Investing in real estate can be a great method to build a lot of wealth right now in 2023. Think about real estate as a long-term investment as the housing market is currently out of control. Not only are property prices rising across the board, but mortgage rates have reached their highest level in almost a decade. That means now is a particularly difficult time to acquire income properties or discover cheap homes that may be refurbished and flipped for a profit. If you have the ability to wait it out, investing in real estate may be an excellent way to amass a significant amount of money.
Recent rate rises have affected home values. As homebuyers’ affordability declines, many stops trying to buy. We’re seeing “price lowered” banners on listings for the first time in years. There’s more positive news for purchasers. 2023 is a balanced year for housing supply and demand. This is ideal for retail purchasers and rental property investors. No longer a “seller’s” market. Rising interest rates raise the monthly mortgage payment, which reduces homebuyers and lowers property values.
Real estate investors want less competition and lower pricing. Real estate investing is a long-term endeavour, therefore perspective is key. In 2020 and 2021, interest rates were very low, hovering around 3%. Recent Fed policies to combat inflation have pushed up mortgage rates. 30-year fixed mortgage rates are 5.5% in July 2022. In January 2022, it was 3.4%. While it may scare some, it’s crucial to see the larger picture.
Real Estate investing makes people think of money. You will see a lot of good reasons for this. Real estate is only available in limited quantities. After all, manufacturing more land is impossible. As a result, real estate is nearly universally thought to be a sound investment. However, it must be acknowledged that conventional views on real estate are changing. This certainly has something to do with the economy. It is not uncommon to find people who are afraid of real estate investing.
Basic principles for successful real estate investments
There are 4 basic principles that you need to understand for successful real estate investment:
- Location:
It is the most important point when it comes to real estate and it is about the most basic aspect of buying a property. It is a good idea to study emerging markets & consult with a real estate agent who has knowledge of the area, do not invest in properties that do not have access to services, good connectivity & basic needs.
When talking about the location it is smart to consider:
- Safety & standard of living
- Hospitals
- Shopping centers / Supermarkets
- Schools / Colleges
- Restaurants
- Social & Tourist attractions
Asset Yantra provides you the best location.
2. Urbanization Services:
Having access to public services is vital to invest in any property;
- Drainage & sidewalls
- Streets & sidewalks
- Electricity
- Access to clean water
- Telephone lines
- Internet access
If they do not have any of these services, it will cost you more money or you will have to wait for them to arrive at the property, which will affect your return on investment (ROI).
3. Security:
It is advisable to make a study of the area with your advisor to know if there are risks of hurricanes (cyclone), floods, landslides or any other factor that may decrease or put at risk your return on investment or investment as such, for example; you have to pay attention to the rates of insecurity and crime in the area, your real estate agent most have this kind of knowledge of the area, which can help you increase your returns, avoid headaches & even lose in the investment.
The safest properties are those that are within real estate projects and planned communities, since they are closed areas, they will give you a sense of community with your neighbors and have 24/7 security services,
Asset Yantra provides you the security.
4. Analyze your Target Market:
By having your target market well analyzed it is easier to identify the ideal type of investment for you, however, to analyze to your target market & know where you want to go it is necessary that you set your investment goals and objectives, here I leave you a questions that will help you establish your objectives as an investor:
- Do you want to invest to see short-term returns? Or have a good capital saved for retirement?
- Do you expect to sell as soon as possible?
- Do you want recover your capital quickly?
- Do you prefer to retain your property until it is the right time to sell?
- Are you looking to take advantage of it to turn it into a boutique, hotel or a property that generates great income?
In conclusion principles are something that as human beings we have followed for thousands of years, they have been there for a long time because they have always worked.
Myths about Real Estate investing
01 : It’s only for the rich people
Fact: We don’t know how or why this myth evolved, dissuading people from investing in real estate. If you are rich, then you can buy a house/office with ease. However, even if you don’t have the required funds, you can opt for a home loan where a financial institution lends around 80% of the property value. You can repay this loan over a long period via affordable installments.
02 : Real Estate Investment are a high-risk investments:
Fact: Every investment has some element of risk associated with it. However, of you compare real estate with other investments like stocks, mutual funds, gold, etc., then the risk are much lower with real estate. This is because the real estate market is less volatile than the stock and gold markets.
03 : The prices will always keep rising:
Fact: Many people believe that real estate prices never stop increasing. Hence, if they invest in a property and hold it for a long time, then their returns would be exponential. This is not true, before you invest in real estate, it is important to remember that price increase is not a never-ending process. Property prices have a saturation point depending on the locality and quality of construction. Once the prices reach their saturation levels, they will stop increasing. Also, a sudden drop in demand can result in a drop I property prices too. Hence, it is important to keep these factors in mind before investing.
04 : It’s all about Perfect Timing:
The truth is there is no perfect timing to invest in the real estate market. While there’s a good chance to end up investing. The truth is, timing will depend on your situation.
Here are some scenarios that you might relate to you:
- Low on funds (whether from job loss, changes in pay, unfortunate, theft, etc.)
- Living in a small home and making ends meet.
- Inherited a large sum of money from someone.
- And so on…..
No matter your situation, you will need to consider the following factors before investing in real estate;
- Financial stability
- Your living situation
- Your familiarity with home buying
- And, your familiarity with home improvement, etc.
These factors will show you how ready or not ready you are to invest in the real estate industry. Therefore, timing isn’t same for everyone.
05 : Own a home before you invest in Rental Properties:
Fact: Owning a home does not qualify you to invest in rental property. On the contrary, many millennials invest in rental properties while living in rental homes of their parents. Investing in rentals can be a great source of income for anyone, not just homeowners.
Mistakes to avoid in real estate investing
A majority of people who invest in real estate do so for a personal reasons, to have security in the form of a home, with only a certain section of the population purchasing real estate for the sole purpose if the investment. There is a possibility for both new and seasoned investors to commit mistakes.
- Rushing the Deal: One very popular error when it comes to real estate is jumping the gun. While it is understandable that investors are in hurry to sign the dotted line, rushing it can have its own consequences. Staying calm and patient while executing a deal is of utmost importance as this added time can help you uncover a better deal or find more relevant information regarding a property.
- Ignoring Paperwork: We often come across multiple cases wherein people are cheated off their property by giving them fake documents. Documentation is perhaps. The most important factor to consider while buying a property. There is a possibility for people to ignore documents, failing to read the contract in its entirety, which could result in them losing both their money and the property.
- Failing To Research: Research is key to every good deal and a lot of us buy a property without sufficient research. Failure to do this can dilute your investment, for you could discover aspects which can bring down the value of the property, or even worse, lead to it being a dead investment.
- Underestimating Costs: The main purpose of investing in real estate is to make profits, but there are instances where people put their money without calculating the costs. Underestimating the costs related to developing, converting or constructing real estate can land you in trouble.
- High Expectations: Investors should have realistic expectations when they buy real estate, for having unexpectedly high expectations can see you ignoring other investment options, relying solely on real estate, which could be a mistake in the future.
- Blindly Trusting Others: A number of people who purchase property are first timers, who often rely on the word of others when they invest. Blindly trusting a third party while investing can be extremely stupid, for people are bound to do things in their best interest. Blind faith can lead to you spending more than what is necessary or purchasing real estate which doesn’t suit your requirements. One should consult experts in order to get a clear picture and rely on the word of those who have a proven record of offering good deals.
- Mistiming the Deal: Timing is key to everything in life and a real estate deal is no different. Most builders offer sales on their products and waiting for them could see you get a better deal on your investment. The demand and supply situation in a particular location also has an impact on prices and it is crucial that one times the deal perfectly to make the most of it.
Committing mistakes is a part of human nature, and while we cannot completely wipe out mistakes, we can learn from them. Remembering a few simple points can ensure that your real estate investment doesn’t become one of the biggest mistakes of your life.
How to Start Real Estate Investing as a Beginner?
Once you have gone through all the basic education and made up your mind, it is time to start your investment journey step by step. If you don’t have experience managing commercial properties, then commercial wins over residential.
Here’s what you need to do to start investing in real estate in any market.
- The initial step is finding the right location, i.e., if your location is great then your investment property will give you a good and stable return on your investment.
- Before beginning this journey, you should take advice from your local real estate agents and investors. In case of any uncertainty of thought always consult real estate professionals.
- You should continue finding off-market discounted properties. You should know the selected housing market inside and out. The business of real estate investing accompanies risk. Going in aimlessly and not recognizing what you are risking in detail is a brisk method to flop as a real estate investor.
- Don’t just grab the first investment property you find. Find various investment properties and afterward choose which suits you the best in terms of your investment goals.
- Always check your credit report and your capacity to finance real estate investments. To be a successful real estate investor, you also need to find a good bank and loan broker. Successful real estate investors know that having good financing options is key to making any investment.
- Do an appropriate screening process with tenants in case of rental property investment.
- Start investing in single-family homes and as your cash flow and equity increase, you can move up to duplexes, triplexes, fourplexes, and eventually apartment buildings. Eventually, you can build a real estate empire and own a portfolio of residential units.
Read Also: Why invest in Commercial Real Estate
Conclusion
In Real Estate, once the market begins to bounce back, investing in real property likewise turns into an all more engaging thought- either as a profession or an awesome side job. Like any other undertaking, however, there’s a correct way and a wrong approach. Successful real estate investors aren’t made overnight.
There is an old rule in poker: if you play for 20 minutes and can’t figure out who the sucker at the table is, then it’s you. The same is valid for real estate investing. If you don’t know the metrics of your proposed real estate investment, you have almost no chance to be a successful real estate investor. To succeed in your first real estate investment, go at a moderate pace, learn temptation. Money lost in a bad investment cannot be recovered so easily.