One of the most reliable and profitable ways to save capital is real estate investment. Both financial analysts and ordinary citizens who want to protect their funds from economic leaps and financial crises agree with this. In addition, using this tool to protect personal savings, you can at the same time significantly increase them.
What else determines the attractiveness of this market mechanism?
Benefits of Real Estate Investments
1. By investing in real estate, the investor creates a constant source of passive income, which means receiving regular profits without additional effort and time costs.
2. The safety of free cash, their protection from rising inflation and other negative economic phenomena.
3. The lack of geographical boundaries for investment. In other words, when deciding whether to invest in real estate, you can consider options for acquiring objects both in Russia and abroad.
4. The ability to implement large-scale long-term projects.
5. Convenience of control and management, which consists in the absence of cash or a bank account requiring constant monitoring of the current market situation.
How to invest in real estate?
The period of the financial crisis, characterized by a sharp decline in prices on the real estate market, is ideal for this type of investment. If we take into account that, according to statistics, several years after the economic downturn, intensive economic growth begins and the resulting increase in the value of real estate, such an investment will become very reliable and profitable in the long term.
Before implementing the first investment plans, you should first familiarize yourself with all the features of the behavior of participants in this market, proven tactics and strategies of experienced investors. You should also conduct a thorough analysis of the current situation in the real estate market, possibly resorting to the help of a professional.
The best ways to invest in real estate, we will consider further.
Success factors
Despite the great popularity of investing in residential and commercial real estate, in recent years the number of successful people conducting this activity has decreased markedly. But public opinion about this area of investment as the easiest and most affordable way to save capital has not changed.
Major players in this market most often work through intermediaries who are real pros in real estate. Their task is to thoroughly study the question posed, collecting and analyzing the maximum information about the object of interest.
When it comes to small-scale investment operations, the investor does without real estate services and the help of specialists, wanting to reduce his expenses. Let's clarify the main points that every novice investor should know in order to profitably invest in real estate.
General market situation
The first stage is the study and study of the current situation in the real estate market itself: trends in changing pricing policies and the dynamics of the main processes. You can listen to the opinions of world famous investment professionals or consult a specialist for an individual consultation.
Payback period
How to invest in real estate, protecting yourself from financial risks as much as possible?
To begin with, it is worth remembering that only free cash is invested in long-term projects. Current trends in the development of the real estate market do not promise quick income in this area. Therefore, the usual speculative buy-sell method will not work here.
In addition, a number of other important points should be taken into account.
For example, if we invest in the construction of real estate, then we automatically agree with the possible extension of the deadline for the object, since such precedents today, unfortunately, are not uncommon. In addition, the resulting object will become attractive to future customers only after the completion of repairs in neighboring apartments. This fact will delay the receipt of income from this type of investment for an indefinite time.
As a less problematic alternative, you can choose a secondary housing, which is faster and easier to rent out. However, its high price will contribute to a significant reduction in the value of the resulting income.
Therefore, when deciding whether to invest in real estate, it is important to remember the long-term nature of this project and its slow payback. In this regard, the decision to buy an apartment in a new building for the latest savings will be clearly erroneous.
Real estate investment income
One of the most important factors when choosing an investment tool is the approximate expected income.
It should be remembered that in investment activities aimed at real estate management, as in any other financial strategy, the level of profitability is directly related to the riskiness of the event. For example, when buying an apartment in a new building, the investor has the right to expect a tangible return on such a project. However, the chances of remaining without invested funds and a finished object are very high.
Time and cost
How much time do you have? After how much you may need invested resources? How much money are you willing to invest at the moment? These three issues need to be clarified in the first place, including in investment activities.
It will also be useful to calculate the exact number of hours that you can regularly devote to a future financial project. Factors that determine the amount of funds required for investment include the market segment, location of the selected object and the general current situation both in the area of interest and in the economy as a whole.
When deciding how to start investing in real estate, it is important to avoid common mistakes that many newcomers face. To do this, you need to turn to the most profitable capital conservation tools.
So which property is better to invest in? Let's figure it out.
Commercial property
This type of investment is characterized by a fairly high level of return.
All experts unanimously recognize the decision to invest in commercial real estate located in large cities as the most optimal strategic move. Such a consensus is justified. Since this tool is the most popular in the context of widely implemented large-scale and small business projects. In this connection, you can be sure that not a single purchased warehouse, industrial or commercial premises will stand idle. But do not have illusions about the ease of such an income. In order for a workshop or warehouse to begin to bring a certain profit, it will take time and financial investments in the purchase of equipment, repairs and general improvement of the facility. You may even have to conduct an advertising campaign or presentation to attract potential customers.
Valuable advice: before investing in real estate in a particular region, it is advisable to consult with experts about the current state of the market. This step will protect against unexpected price fluctuations that can lead to significant financial losses.
Housing investment
Despite the recommendations of experts, the residential market is still the most popular in terms of investment today. In this segment, the object that belongs to the middle price category will be the best choice. This option is easier to rent out, making a quick profit.
In terms of benefits, it is worth paying attention to facilities under construction and finished new buildings. Having invested in this type of housing, you can count on income of 10% of the market value of the apartment. A high level of financial return is due to the fact that the prices of these residential properties are usually lower than in the secondary market.
Property Abroad
A separate topic for discussion is investment in foreign real estate. In this area, investments in the hotel sector are considered the most profitable option due to the rapid increase in prices in the European hotel business.
Investors who are not afraid of high risk should pay attention to the possibility of acquiring housing in developing countries. Due to low current prices, this type of investment can be a very profitable way to save capital.
And how to invest in real estate with a small capital?
Investment in mutual funds
Real estate unit investment trusts are very popular all over the world today. In Russia, they operate in a closed format. The essence of their functioning is to accumulate the funds of investors and their further direction in the acquisition of rights to share in the ongoing construction of multi-storey buildings. It should be noted that such an investment can be made only at the stage of issuing a building permit.
This method has several advantages:
- relatively low share price (from 100 to 1000 dollars);
- elimination of risks inevitable in the management of actual real estate;
- payment of rental income from most funds;
- the ability to invest in several promising objects at once;
- the absence of territorial restrictions, allowing, while in Russia, to invest in real estate abroad;
- very high level of liquidity.
The few disadvantages of this method of investing include:
- high level of volatility - a frequent change in the value of the share up and down;
- the presence of a certain set of conditions when investing in foreign funds - providing evidence of the legality of personal income and excellent command of the English language.
Shares of the company - owner of real estate
This method involves the acquisition of shares in a particular company with a further prospect of increasing the value of purchased securities.
Is it profitable to invest in real estate this way? Judge for yourself based on the following benefits:
- the ability to make an investment with a small capital due to the low entry threshold;
- lack of physical real estate and related risks.
It is worth noting the negative sides:
- relatively low liquidity;
- small diversification (low threshold for investing in several projects at the same time);
- the presence of high risks.
Land purchase in Russia
Despite the very risky and costly nature of this method of investing, coupled with the difficulties associated with the search and privatization of land, this method still allows you to profitably invest in real estate, and that's why.
Firstly, there is a high probability of rising prices for land near cities, amounting to approximately 20%. This is facilitated by the accelerated development of the construction of cottages in the suburban area.
Secondly, this option will be an excellent answer to the question of how to invest in real estate with a small capital. The cost of the site itself is relatively low, and maintaining the facility will not require large financial resources, in contrast to the impressive costs of repairs and utilities in the case of an apartment.
Buying land abroad
The lower limit for such investments is around $ 15,000. The benefit of this option is a high mark-up (about 25%) after deciding to start construction on the acquired land. However, such an investment is quite risky due to the small demand for real estate in the US and Europe.
Housing Certificate
Another way to invest in real estate is to buy a document confirming the right to a specific living space in a house under construction. After putting the object into operation, you can exchange this housing certificate for the apartment, paying the remaining amount, or receive the due funds, based on the price of the object at the time of completion of construction work. The advantage of this method is to save on the price difference between primary and secondary housing.
However, when planning to live in an apartment purchased in this way, it is worth remembering the high potential risk of this event. This is due to the fact that in the constructed house there may not be a living area suitable for the area indicated in the certificate characteristics. In addition, given the long-term duration of the construction process itself, it is important to remember the risk of lowering property prices, which, according to numerous expert opinions, will be observed in our country in the very near future.
Forecasts of specialists in the current year
In the I and II quarter of this year, according to authoritative statements by many financial analysts, a significant drop in residential property prices was not expected. In general, these forecasts were fully justified. However, in the second half of the year, trends change sharply, tending to a fairly intensive decline in prices. Leading experts see one of the main reasons in raising interest rates on mortgages. Such an interdependent process will lead to a subsequent increase in bank interest, based on the upcoming change in the average market price. As a small amendment, experts admit the transience of this situation.
Based on these forecasts, we can conclude about the intense dynamics and revival of the real estate market in 2018. Perhaps this phenomenon is associated with a certain stabilization in the Russian economy.
The current market situation and expert forecast estimates clearly indicate the advisability of acquiring a property this or next year. After a few years, such an investment will be able to bring substantial profit from subsequent resale.
Concerns of investors and their causes
The year 2015 was marked by the introduction of a new type of property tax, which replaced the previously mandatory property tax.
This innovation is still alarming for many investors. The tax base for such a collection is the cadastral value of the object. Various deductions related to the presence of other real estate in a person are not valid in the new settlement system.
Financial analysts reassure worried investors, saying that the current procedure is currently valid only for cities of federal importance.
Only by 2020 is it planned to extend this type of collection to the entire territory of Russia. It follows that in the next two years, it is profitable to purchase residential real estate or commercial properties in small cities and small towns, in order to sell them at a very favorable price closer to the date of introduction of the changes.
conclusions
Do not forget that during an economic downturn, the stability and reliability of foreign currency funds and other financial institutions drops sharply, in contrast to real estate investments.
This fact leads to the obvious conclusion that investments in residential and commercial real estate are currently the most reliable, profitable and safe tool for saving equity.
The economic situation of Russia and the instability of its geopolitics do not significantly affect this factor. Moreover, according to experts, the current difficult situation on the world stage will soon be successfully resolved. And this means that the most opportune moment will come for the realization of the existing property on very favorable terms.
Therefore, if you have free money at your disposal, hurry to make a profitable investment using one of the schemes we have proposed.