The Most Important Factors For Investing In Real Estate

Compared with other types of investments, real estate investing involves a relatively favorable risk/reward profile, but with relatively low liquidity (ease of entry and exit). Let's see some of the most important factors to be considered for investing in real estate.

Location of the Property: Location still rules and remains the most important factor for profitability in real estate investment. Proximity to amenities, peaceful conforming areas, neighborhood status, scenic views, etc. are major factors for residential property valuations; while proximity to markets, warehouses, transport hubs, freeways, tax-exempt areas, etc. play an important role for commercial property valuations.

Real estate financing during purchase, listing price during sale, investment analysis, insurance premium and taxation - all depend on Real estate valuation.

Identify which of the following broad categories suits your purpose and prepare yourself accordingly:

Buy & Self-use: Savings on rentals, benefit of self-utilization and value appreciation

Buy & Lease: Regular Income & long term value appreciation. Requires building a temperament of being a landlord - for handling possible disputes & legal issues, managing tenants, repair work, etc.

Buy & Sell (Short Term): Quick, small to mediocre profit - usually buying under construction properties and selling slightly high once ready

Buy & Sell (Long Term): Large intrinsic value appreciation over long period of time; solution for long term aims like retirement planning, child’s education, etc.

Develop draft projections for the following modes of profit & expenses:

Expected cash flow from rental income - Inflation favors landlords for rental income. Expected increase in intrinsic value due to long term price appreciation

Benefits of depreciation (and available tax benefits). Cost benefit analysis of renovation before sale to get better price. Cost benefit analysis of mortgaged loans vs value appreciation.

 

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