Undoubtedly, the two surest investments are the stock market and real estate. However, under the right circumstances, real estate can be an alternative to stocks and even do better. Investing in property gives returns over time while offering lower risk and providing greater diversification.
Factors to Consider
So, what’s the most important thing to look for in real estate? Numerous factors can help determine if an investment is suitable for you. Here’s a look at some of the most important things to consider if you plan to invest in a property.
Location, Location, Location
Location continues to be the most important factor for profitability in real estate. When you set out in search of a property, make sure the neighborhood isn’t just desirable to you but has objective qualities such as attractive amenities, safe streets, and good schools. These will help ensure your investment appreciates over time.
Valuation of the Property
Property valuation assesses your property’s value based on the location, condition, and multiple other factors. It is important for financing during the purchase, listing price, investment analysis, insurance, and taxation—they all depend on real estate valuation.
Investment Purpose and Investment Horizon
Given the low liquidity and high-value investment in a property, a lack of clarity on purpose may lead to unexpected results, including financial distress—mainly if the investment is mortgaged.
Identify what suits your purpose, and then plan accordingly.
Leverage
Leverage in real estate is using borrowed money to buy a property. You can use significant amounts of financing when investing in real estate without adding a ton of risk. Just make sure you know the terms, conditions, and other charges levied by the mortgage lender. So, shop around to find lower interest rates and better terms.
Overall Real Estate Market
As with other types of investments, it’s good to buy low and sell high. Real estate markets fluctuate, and it pays to be aware of trends. It’s also important to pay attention to mortgage rates so you can lower your financing costs when possible.
If you’re into investing in a property, stay up-to-date with trends and statistics. Certainly, investing in property returns over time and helps diversify your portfolio. Furthermore, it can provide steady cash flow, substantial appreciation, tax advantages, and competitive risk-adjusted returns, making it a sound investment. Not to mention its low correlation with other major asset classes, which is a good thing.
Start investing now! As Marcello Arrambide, founder of Day Trading Academy, puts it: “Investing in real estate allows you to protect yourself and your wealth. While the real estate market has gone up and down, it has never declined over time. Compare that to when Wall Street collapsed or currencies that aren’t backed by anything tangible. Over time, you will always get value from real estate that produces income — like a coffee farm, for example. Even better if you choose a property with inherent value, such as a location in Times Square.”