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Richard Maize

Top most factors for Real Estate Investments

In a real estate deal, what should you look for? While location is crucial, there are other other factors to consider when determining whether or not to invest. If you want to invest in real estate,here are some of the most important things to consider.

TOP MOST FACTORS:

1. The Location of the Property

2. The Property’s Appraisal

3. Investment Objectives and Time Horizon

4. Profit Potential and Expected Cash Flows

5. Use Leverage With Caution

6. Existing Property vs. New Construction

7. Real Estate Indirect Investments


1. The Location of the Property

The phrase “location, location, location” still holds true in real estate investing and is the most critical factor to consider. The accessibility of facilities, open space, appealing vistas, and the reputation of the community all influence the value of a residential property. Commercial property valuations are influenced by proximity to marketplaces, warehouses, transportation hubs, freeways, and tax-free zones.

What to Be Aware Of:

When analysing property placement, a mid-to-long-term perspective of how the area is expected to change over the investment period is crucial. For example, today’s peaceful open space behind a residential structure could become a noisy manufacturing site in the future, decreasing its value. Examine the ownership and intended use of the immediate areas where you plan to invest in great detail.


2. Appraisal of the Property

What Is the Point?

Property valuation is essential for acquisition financing, as well as listing price, investment analysis, insurance, and taxation.

What to Be Aware Of:

Here are some examples of common real estate valuation techniques:

The most popular and applicable to both new and old homes is a method based on recent comparable sales of properties with similar attributes.

Cost-based strategy: land and building costs minus depreciation—appropriate for new development

Approach to income: based on expected cash inflows—suitable for rental properties


3. What Are the Benefits of Having an Investment Goal and a Time Horizon?

Due to the limited liquidity and high value of real estate assets, a lack of clarity on intent may have unanticipated repercussions, such as financial distress—especially if the property is mortgaged.

What to Be Aware Of

Decide which of the primary categories listed below best meets your requirements, and then make plans accordingly: 

Purchase and use independently. You’ll save money on rent and enjoy the convenience of self-use while also improving the value of your home.

There are both purchase and lease options available. This ensures a steady revenue stream as well as long-term value growth. A landlord’s temperament, on the other hand, is essential to deal with potential conflicts and legal issues, as well as manage renters.


4. Profit Potential and Cash Flows Expected

What Difference Does It Make?

Cash flow refers to the amount of money left over after expenses. Positive cash flow is required for a good rate of return on an investment property.

What to Be Aware Of

Make profit and expense projections for the profit and expense modes shown below:

A certain level of cash flow is expected from rental income (inflation favours landlords for rental income)

Price appreciation over time is expected to increase intrinsic value.

The Benefits of Depreciation (and available tax benefits)

To get a better price, undertake a cost-benefit analysis of renovations before selling.

Cost-benefit analysis of a mortgaged debt vs. value appreciation


5. Be Wary of Leverage

What’s the big deal about it?

Loans are easy to get, but they can be expensive. You pledge your future earnings in exchange for utility today at a long-term interest rate. Make sure you understand how to manage these loans so you don’t get into too much debt or “over-leverage.” In adverse market conditions, even real estate specialists suffer over-leverage, and liquidity constraints combined with significant debt obligations can derail real estate endeavors.

What to Be Aware Of

Consider the following possibilities based on your current and projected earnings:

Choose from fixed-rate, adjustable-rate mortgages (ARMs), interest-only, no-down-payment, and other mortgage alternatives. It’s important to mention.


6. Pre-existing vs. New Construction

What Difference Does It Make?

New building often features lower prices, more customization possibilities, and more modern facilities than older construction. Delays, increased costs, and the unknowns of a newly built place are all dangers.

Existing homes offer convenience, quicker access, pre-existing amenities (such as utilities and landscaping), and, in many cases, lower pricing.

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