So, you are planning become a real estate investor. Well, that’s certainly the best move to boost your finance in 2016. For many years, real estate has been a good investment option for most entrepreneurs mainly because it’s a much safer investment option compared to other investment ideas such as the stock market. However, before investing your hard earned money into this lucrative investment idea, there are important things to learn about this business. This brief article will bring you up to speed with the most important things to learn before investing in real estate.
- Location – study the market
If you are planning to invest in real estate and make huge profits from rental income and capital value appreciation, you will first need to choose between residential or commercial real estate investments. It is important to conduct market research to know the most attractive investment opportunity in the location you settle for. By carrying out a careful study, you will understand which property suits the location better and which one will generate maximum returns.
- Financing – Looking for lenders
How to acquire enough finance to venture into this lucrative business is another important thing to learn. Most banks offer loans for residential property easily compared to commercial property. Banks and lending institutions can offer loans up to 90% of the value of the property while others will only offer 60% of your property’s value in commercial real estate. In addition, the interest rates for these facilities vary which different lenders and the purpose for the facility. The interest rates for commercial real estate are also high compared to those for residential property. Therefore, it is wiser to venture into commercial real estate if you only have enough capital. But, if you have limited funds, it’s wiser to opt for residential real estate.
- Tax Advantage – Go for low tax alternatives
Real estate agents may help you determine which areas have the best and worst tax structures. Alternatively, you can call your local tax assessor to get information on how much each town charges in tax. The assessor will inform you when the last time the area was evaluated by the township and guide you if there will be a future reassessment of the area. In addition, it is also important to know that taxes charged differ with each property. Commercial properties do not get tax breaks as residential investors do.
Important: If you have two towns next to each other – one with high property taxes and the other with low property taxes, the one with lower tax will have a higher demand. Therefore, it is wiser to invest in such an area.
- Expected rental returns
When it comes to returns, commercial properties have proved o be a better source of returns than residential property with rental yields (8-11%) to (2-4%). Also, maintenance of commercial property is easier and requires limited operational management as the properties are looked after by professional management agencies. In addition, investors in commercial properties do not have to spend more furnishing the houses as the tenants themselves will redesign the interior of the house to their own liking.
- Selling the property
Well, this may not be the ultimate goal for your investment but it does not hurt to have an exit plan from the business in case you want to exit or liquidate your real estate. Furthermore, another way of investing in real estate is selling your own property and buying a new one for higher returns. Therefore, learning how to buy and sell property when investing in real estate is one of the important things you need to learn.
To get best returns from selling your property, it is important to understand that it takes a lot of time to find the right buyer. Also, the economy’s cycle will also play a huge role when it comes to selling your property. It is therefore important to learn how to sell your property and get the best returns from it.
Like any other business, real estate investment has its own flaws. Therefore, it pays a lot to do proper research before investing in it. Well, those are some of the important things you need to learn as a real estate investor before investing in the lucrative business. I hope the information has been of great use.