Investing in real estate is a profitable and low-risk investment, as this financial instrument is always in demand and liquid. The price of this asset 90% of the time is in an uptrend, which makes it possible to assess the potential profit from leasing premises in the long term.
Benefits
Why are real estate investments considered a low-risk and more reliable option than, for example, a bank deposit? Before investing in this asset, you need to make sure its payback.
- Housing for most people is the same essential commodity as food or clothing. That is why there is always a demand for real estate, no matter what economic disasters around.
- The income from the rental of premises increases over time, as the area annually rises in price. This allows you to quickly pay back your investment.
- If you invest in a new building, then during its construction it is already possible to calculate your profit - as a rule, during this period housing already rises in price by 30-40%.
- When buying real estate on credit from a developer or bank, you get rid of inflation risk if you carefully study all the nuances of the contract. No matter how expensive square meters or your salary increase, you will pay the same amount of money every month.
The disadvantages of real estate investment
Before considering investing in real estate as a way to obtain passive income, it is worth evaluating the negative sides of such an investment of your funds.
- If you did not inherit additional housing, then you will have to purchase it, and this is a significant financial outlay that not everyone can afford. In addition to the initial contribution, you will need to invest in its repair, payment of utilities.
- Investing in real estate without proper analytical work, that is, without analyzing its location, checking the documentation of the land on which the building was erected, can be extremely disadvantageous. There are often cases when a new building interferes with the residents of the surrounding houses, or a store on the first floor of the building does not allow grandmother to sleep peacefully from the apartment located on the second. This leads to mass protests, letters to the mayor's office, which can subsequently force you to sell or retrain your additional housing.
- If you do not pay attention to all the bureaucratic subtleties and legislation, then it is quite possible that you will not be able to recoup your investments, as you may be the owner of real estate intended for large families or young families with appropriate benefits.
Real Estate Investments for Beginners
Residential and commercial real estate is in constant demand, which encourages many people to look for opportunities to earn through renting it out. Investing in real estate for dummies looks simple, but they need to thoroughly study this asset before trying to create any passive income.
What a beginner needs to know:
- One-room apartments are in the greatest demand and sold faster than others.
- The cost of rented housing is to a large extent determined by its location and transport communications nearby.
- In addition to the initial investment, real estate investment involves the periodic costs of repairing and restoring damaged or stolen property.
- You will have to spend your time finding tenants, renting, covering utility bills. If the living space is rented daily or hourly, then the passive income turns into active, which requires a lot of time.
Investing in real estate for dummies is the acquisition of living space and leasing for a long term. If there is not enough capital to buy a home, then you can buy it in a mortgage, after calculating whether it is profitable under the current conditions of lending and the average monthly rent.
The easiest option for a beginner is a partnership in a fund, whose specialists independently choose an area and turn it into an income tool. A big influence on the size of your profit is precisely what the professionals do all the work.
How to choose an investment object
The choice of a property depends solely on the size of your capital. Living space is always in demand, since a person needs a roof over his head as much as food. Investing in commercial objects requires a lot of knowledge and effort, because it is necessary to develop the concept of the premises, to reproduce the decoration in accordance with the class of real estate and its type.
The amount of potential income should be calculated based on your capabilities: in which city and area you can buy living space, what repairs you will make in it, will you buy on credit or for cash. It is necessary to predict whether this settlement will expand in the future, how willingly people strive to get there, if it is not a metropolis with a lot of opportunities for self-realization.
Acquisition of real estate for rent
Investing in real estate for the purpose of further leasing is a stable passive income. It is most reasonable to purchase housing with 1 or 2 rooms, or country houses near a summer resort and ski resort. If you buy real estate in the city, then much attention should be paid to the condition and location of the house, its safety. For many guests, parking or garages nearby is important. Transport communications are of great importance.
When purchasing cottages, you need to be prepared for the fact that for several months of the year they will be empty and not generate income. When planning a purchase of real estate, consider the prospects for its price growth in subsequent years, your initial costs and periodic (repair, cleaning after tenants). There are frequent cases of delayed rental payments and theft in rented apartments. Investing in real estate may be unprofitable if housing is not in demand for any reason, and there is no way to recoup the investment.
All this is especially important to consider if housing is purchased on credit. The rent must be greater than the monthly bank payment. In addition, you need to consider the fact that you paid the down payment. Otherwise, the return on the acquired asset will be negative for the first few years. The advantage of such an investment is that relatively small initial capital is required.
Commercial Real Estate Investing
Currently, commercial real estate brings more income than residential. This is due to the growing demand for offices, trading floors. In remote areas of cities, many private entrepreneurs seek to open their own business, which encourages investors to invest in non-residential space.
Before you purchase a room, you need to determine its concept. Evaluate what is nearby to understand what will be most in demand in this area by potential consumers of goods and services. For example, there are no shops nearby - which means that you need to repair the premises taking into account the requirements for the appearance of the trading floor. It is worthwhile to understand that investment in commercial real estate will only generate income if you first consider all your actions.
Keep in mind that when buying a room, it will take several months to reissue all the documents. It will take some more time for repair work, drawing up contracts for the provision of utility services. Business recovery will begin only in the third year of its existence.
Predicting the potential return on the asset, monitor the situation in the state, economic conditions, changes in the value of currencies, oil and gas prices. Also, there is always the possibility that the area will decline, the tax system will change. Standards are constantly changing, and leased real estate must comply with them, so before investing in it, you need to analyze a lot - only in this case, its operation life can reach several tens of years.
How to start investing in real estate
Many people want to have passive income regardless of whether they have initial capital for investments. Investing in real estate from scratch is real if you are willing to spend your energy instead of money. A very profitable option is the construction of garages with their subsequent sale or lease. You will invest in land and material for the construction of garages, then quickly pay back your investments and earn a solid additional amount that can be spent on the purchase of residential or commercial space.
Investments in real estate of the Russian Federation
The real estate market in Russia is developing quite rapidly. This is a huge country in which people en masse strive to move to big cities, so investing in living space is very profitable. In megacities, commercial real estate is in demand, but the acquisition of such an asset will cost an amount unthinkable for most businessmen.
Foreign entrepreneurs consider investing in real estate in Russia a profitable business, but present their requirements for developers, standards for the construction and maintenance of the area. The discrepancy between expectations and reality forces conservative businessmen to look for other assets for their investments, while aggressive ones are actively buying real estate in Russia.
Investment in real estate in Ukraine
Real estate in Ukraine is in great demand, but this phenomenon is irregular due to the unstable political and economic situation of this state. The income will come from the purchase of living space and its rental for a long term and daily. In large cities, it is wise to purchase commercial real estate, especially in residential areas, as cities expand. A business with the construction and sale of garages will be beneficial, since many people have to leave their cars just on the streets, which is very unsafe.
It is worth noting that real estate investment in Ukraine is profitable also because recently the government introduced a tax on income from deposits. In addition, during the economic crisis, many assets are frozen, and investors are not able to withdraw their funds, despite all the complaints, protests and riots. Thus, the acquisition of an asset such as real estate is quite profitable in Ukraine.
Real estate investment abroad
Investing in real estate abroad is, of course, very profitable, but also requires large material costs. The advantage of this investment is the economic stability of Western countries. However, in order to invest in foreign assets, you need to be a good analyst so as not to go bankrupt, because no one was ready for the fall of the US real estate market in 2007, when it had been continuously growing for several decades before that.
If you have sufficient capital, then it is worth investing in the hotel business, but do not neglect the services of specialists who will help you reduce the risks of your investments. Be prepared for the fact that abroad there are very high requirements for quality, architecture of new buildings, as well as service.
Investing in the real estate market is a very reliable and profitable business, if you invest your money wisely. Apartments and commercial premises can not only be rented out, but also resold when economic conditions favor this. In this area of business, you can earn by different methods of selling housing, the main thing is to start correctly.