Factors To Consider Before Investing In Real Estate

Factors To Consider When Investing In Real Estate

Here are some of the most important factors to consider if you plan to invest in real estate:

1. Property Valuation 

Listing price, purchase price, insurance, taxation, and investment analysis depend on property valuation. Consider the various valuation methods such as comparing prices of properties with similar attributes, cost of the land, construction less the depreciation, and expected cash flow for rentals.

2. Property Location 

Property location is an essential factor to consider for profitability in real estate. Features like proximity to amenities, scenic views, and the neighborhood’s status are prominent factors in residential property valuations. For commercial properties, consider features like closeness to markets, warehouses, freeways, and tax-exempt areas. When considering property location, a key factor is a mid to long-term view regarding how the site expects to evolve over the investment period. For example, today’s open land next to a residential building could become a loud manufacturing facility in the future, thus diminishing its value.

3. Investment Purpose

Real estate investment has low liquidity and high-value assets. As a result, a lack of clarity on an investment’s purpose might result in unexpected outcomes, such as financial distress if you mortgage an investment. It is essential to know which of the following categories suits your goal and plan adequately.

• Buy And Self-Use

You will own the property and not pay rent while also getting value appreciation.

• Buy And Lease

It provides you with regular income from rent collection and long-term value appreciation.

• Buy And Sell (Short Term) 

Quick sale with small to medium profit. Typical for property under construction and sold at a profit upon completion.

• Buy And Sell (Long Term) 

There is a considerable intrinsic value of the property over a long period.