9 Factors That Matter In Real Estate Investment

Real estate investment is complex. If an investor wants to make money by investing in real estate then, he must be aware of the risks and long-term benefits. The goal of an investor should be to strike the best deal possible, taking all risks into account. It always makes sense to optimise.

Let us take a look at nine factors that matter in real estate investment.

RoI (Return on Investment)

Investors should learn the art of earning high returns on their investments. The return on investment depends on the risk and the time it takes to maintain the property. As real estate is not a very liquid asset, it is not easy to convert it into cash quickly. It needs an established market with enough participants to sell off the asset without a huge impact on the price. To earn good returns on investment, investors should attempt to strike a fair deal. It is important to buy cash-flow-positive properties.

Cash flow from rentals

Real estate investors have more control over the cash flow than on risks. Cash flows from real estate assets are stable and far more predictable than that of most other investments. This is why investors invest in rental properties. Cash flows can help float you through bad times and help you build other business or reinvest in more real estate. A properly managed rental property can provide a steady income stream in the form of rental payments.

Upgrading to invested property

Investors can improve their investment property to earn more profit through cash flows, instead of selling it. In many cases, a minor renovation can raise the value of a property. When times change, trends and styles change too. By keeping this simple fact in mind, investors can make the property more valuable to tenants. To get the most out of your investment, find out the improvements that actually raise the value of a property. Installing energy efficient appliances and windows, for example, can vastly raise a property's value.

Security

Like in other asset classes like equity and debt, property prices do not fluctuate widely. This gives an immense sense of security for investors. Real estate is one of the few investments that can be insured and protected from damage. By having insurance coverage, investors are able to claim damages when something unexpected happens. Market trends have a great impact on real estate prices. So, it is important to study the property and the location before buying real estate assets.

Leverage

Real estate is a reasonably flexible investment. Leverage is the ultimate power of investing. In real estate, leverage has a lot to do with the asset itself. For investor it is not that difficult to get a loan. Banks usually approve loans up to 75-80 per cent of the value of the asset. Banks are happy lending huge sums of money to buy off real estate because they know it is one of the safest and most profitable investments available. Also when you leverage an investment, you gain the benefits of appreciation on the total asset value, while investing only a small amount of your own money.

Loan pay down

When an investor invests in a rental property, taking a mortgage loan will give you huge profits. The tenant actually makes the loan payment through monthly rents that the investor receives. So, this raises your net worth each month.

Customised occupancy

It is a myth that investors buy property purely to invest in the real estate sector. Generally, investors are fascinated by real estate investment because they themselves can use the property. It is up to investors to decide whether they want to live there,  rent out partially and become the live-in landlord.

Price appreciation

Even though the market is sluggish now, returns from real estate investment have proven to be good over the long run. Of course, it is hard to predict the real estate trends. But prices will sooner or later rebound, perhaps not quite as feverish as before. Price appreciation happens over the long run.

Add few extra time to manage

Few properties involve additional management to make them an ideal investment. Like vacation homes/vacation rentals, properties in bad locations or college rentals/PG requires extra time to manage and maintain for the value addition. These highly profitable investments require good management. The time involved in managing such investments is worthwhile.