How to invest in real estate: ways to invest, strategies, risks, tips

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

One of the most reliable and profitable ways to save capital is investing in real estate. Both financial analysts and ordinary citizens who want to protect their funds from economic surges and financial crises agree with this. In addition, using this tool to protect personal savings, you can significantly increase them at the same time.

What else makes this market mechanism attractive?

Benefits of investing in real estate

1. By investing in real estate, the investor creates a constant source of passive income, which means receiving regular profits without additional effort and time.

2. Preservation of free funds, their protection from inflation and other negative economic phenomena.

3. Lack of geographical boundaries for capital investment. In other words, when deciding how toinvest in real estate, you can consider options for acquiring objects both in Russia and abroad.

4. Ability to implement large-scale long-term projects.

5. Convenience of control and management, which consists in the absence of a cash supply or a bank account, requiring constant monitoring of the current market situation.

How to invest in real estate?

The period of the financial crisis, characterized by a sharp decline in real estate prices, is ideal for this type of investment. If we take into account that, according to statistics, a few years after the economic downturn, intensive economic growth begins and the resulting increase in the value of real estate objects, then such an investment will become very reliable and profitable in the long term.

Before the implementation of the first investment plans, you should first familiarize yourself with all the peculiarities of the behavior of participants in this market, proven tactics and strategies of experienced investors. You should also conduct a thorough analysis of the current situation in the real estate market, possibly with the help of a professional.

The best ways to invest in real estate, we will consider next.

Success Factors

Despite the great popularity of investing in residential and commercial real estate, recently the number of successful people leading this activity has noticeably decreased. But public opinion about this direction of investment asthe easiest and most affordable way to save capital meanwhile has not changed.

Major players in this market most often work through intermediaries who are real real estate pros. Their task is to thoroughly study the question posed, collecting and analyzing the maximum information about the object of interest.

When it comes to small investment operations, the investor does without real estate services and the help of specialists, wanting to reduce their costs. Let's clarify the main points that every novice investor should know in order to profitably invest in real estate.

General market situation

The first stage is the study and study of the current situation in the real estate market itself: trends in price policy changes and the dynamics of the main processes. You can listen to the opinions of world-renowned investment professionals or contact a specialist you know for an individual consultation.

Payback periods

How to invest in real estate, protecting yourself from financial risks as much as possible?

For starters, it's worth remembering that only free cash is invested in long-term projects. Current trends in the development of the real estate market do not promise quick income in this area. Therefore, the usual speculative "buy and sell" method will not work here.

In addition, there are a number of other important points to consider.

For example, if we invest in the construction of real estate, we automatically agree to a possible postponementdelivery of the object, since such precedents are, unfortunately, not uncommon today. In addition, the resulting object will become attractive to future customers only after the completion of repairs in neighboring apartments. This fact will postpone the receipt of income from this type of investment for an indefinite period.

As a less problematic alternative, you can choose secondary housing, which is faster and easier to rent out. However, its high price will contribute to a significant decrease in the amount of income received as a result.

Therefore, when deciding whether to invest in real estate, it is important to keep in mind the long-term nature of this project and its slow payback. In this regard, the decision to buy an apartment in a new building on the last savings will be clearly erroneous.

Property investment income

One of the most important factors when choosing an investment instrument is the approximate amount of expected income.

It should be remembered that in investment activities aimed at real estate management, as in any other financial strategy, the level of profitability is directly related to the riskiness of the event. For example, when purchasing an apartment in a new building, an investor has the right to expect a tangible return on such a project. However, the chances of being left without invested funds and a finished object are very high.

Time and cost

How much time do you have? After how much you may need the invested resources? How much money are you willing to invest at the moment? These three questions need to be clarifiedfirst of all, engaging in investment activities.

It will also be useful to calculate the exact number of hours that you can regularly devote to a future financial project. The factors that determine the amount of funds required for investment include: the market segment, the location of the selected object and the general current situation both in the area of interest and in the economy as a whole.

When determining how to start investing in real estate, it is important to avoid common mistakes that many newcomers face. To do this, you need to turn to the most profitable capital preservation tools.

So what is the best property to invest in? Let's find out.

Commercial real estate

This type of investment is characterized by a fairly high level of return.

All experts unanimously recognize the decision to invest in commercial real estate located in large cities as the most optimal strategic move. This consensus view is entirely justified. Since it is this tool that is most in demand in the context of widely implemented large-scale and small business projects. In this connection, you can be sure that not a single acquired warehouse, industrial or commercial premises will be idle. But don't be under any illusions about the ease of such income. In order for a workshop or warehouse to start generating a certain profit, it will take time and financial investments in the purchase of equipment, repairs and generalbeautification of the object. You may even need to run an advertising campaign or presentation to attract potential customers.

Valuable advice: before investing in real estate in a particular region, it is wise to consult with experts about the state of the market at the current moment. This step will protect against unexpected price fluctuations that can lead to significant financial losses.

Investment in housing

Despite the recommendations of experts, the most popular in terms of investment today is still the residential real estate market. In this segment, the best choice would be an object belonging to the middle price category. This option is easier to rent out, making a quick profit.

In terms of benefits, it is worth paying attention to objects under construction and ready-made new buildings. By investing in this type of housing, you can count on an income of 10% of the market value of the apartment. The high level of financial return is due to the fact that the prices for these residential properties are usually lower than in the secondary market.

Property Abroad

Investments in foreign real estate are a separate topic for discussion. In this area, investments in the hotel sector are considered the most profitable option due to the rapid growth in prices in the European hotel business.

Investors who are not afraid of increased risk should pay attention to the possibility of acquiring housing in developing countries. Thanks tolow current prices, this type of investment can be a very profitable way to save capital.

How to invest in real estate with little capital?

Investing in mutual funds

Real estate mutual funds are very popular all over the world today. In Russia, they operate in a closed format. The essence of their functioning lies in the accumulation of funds of investors and their further direction in the acquisition of rights to equity participation in the current construction of multi-storey buildings. It should be noted that such an investment can only be made at the stage of issuing a building permit.

This method has a number of advantages:

• relatively low share price (from 100 to 1000 dollars);
• avoiding the risks inherent in managing actual real estate;
• payment of annuity income by most funds;
• possibility to invest in several promising objects at once;
• lack of territorial restrictions, allowing, while in Russia, to invest in real estate abroad;
• very high level of liquidity.

The few disadvantages of this investment method include:

• high level of volatility - frequent change in the value of a share up and down;
• the presence of a certain set of conditions when investing in foreign funds - the provision of proof of the legality of personal income and excellent command of the English language.

Shares of the company - the owner of the property

This method involves the acquisition of shares of a particular company with a further prospect of increasing the value of the purchased securities.

Is it profitable to invest in real estate in this way? Judge for yourself based on the following benefits:

• opportunity to invest with little capital due to low entry threshold;
• lack of physical real estate and associated risks.

It is worth noting the negative aspects:

• relatively low liquidity;
• small diversification (low threshold for the ability to invest in several projects at the same time);
• presence of high risks.

Purchase of land in Russia

Despite the very risky and costly nature of this method of investing, coupled with the difficulties associated with finding and privatizing land, this method still makes it possible to profitably invest in real estate, and here's why.

Firstly, there is a high probability of growth in prices for plots near cities, amounting to about 20%. This is facilitated by the accelerated development of the construction of cottages in the suburban area.

Secondly, this option will be an excellent answer to the question of how to invest in real estate with little capital. The cost of the site itself is relatively low, and the maintenance of the facility will not require large financial resources, in contrast to the impressive repair costs.and utilities in case of purchasing an apartment.

Purchasing land abroad

The lower limit for such investments is around $15,000. The benefit of this option is a high level of margin (about 25%) after the decision to start construction on the purchased land. However, such an investment is quite risky due to the low demand for real estate in the US and Europe.

Housing Certificate

Another way to invest money in real estate is to buy a document confirming the right to a specific living space in a house under construction. After putting the object into operation, you can exchange this housing certificate for an apartment by paying the missing amount, or receive the money due, based on the price of the object at the time of completion of construction work. The benefit of this method is to save on the difference in prices of primary and secondary housing.

However, when planning to live in an apartment acquired in this way, it is worth remembering the high potential risk of this event. This is due to the fact that in the built house there may not be a living area that is suitable for the area specified in the certificate characteristics. In addition, given the long-term nature of the construction process itself, it is important to remember the risk of real estate price decline, which, according to numerous expert opinions, will be observed in our country in the very near future.

Forecastsspecialists this year

In the I and II quarters of this year, according to authoritative statements by many financial analysts, no significant fall in residential real estate prices was expected. In general, these forecasts were fully justified. However, in the second half of the year, the trends change dramatically, leaning towards a rather intensive price reduction. Leading experts see one of the main reasons for the increase in mortgage rates. Such an interdependent process will lead to a subsequent increase in bank interest, based on the upcoming change in the average market price. As a small amendment, experts allow the transience of this situation.

Based on the above forecasts, we can conclude that the real estate market is experiencing intensive dynamics and recovery in 2018. Perhaps this phenomenon is associated with a certain stabilization in the Russian economy.

The current market situation and expert forecasts clearly indicate the feasibility of acquiring a property this or next year. After a few years, such an investment will be able to bring a significant profit from the subsequent resale.

Investors' fears and their reasons

2015 was marked by the introduction of a new type of property tax, which replaced the previously existing mandatory property tax.

This innovation is still alarming many investors. The tax base for such collection is the cadastral value of the object. Various deductions related to the fact that a person has other real estate do not apply in the new settlement system.

Financial analysts are calming worried investors, saying that the current procedure is currently only valid for federal cities.

Only by 2020 is it planned to extend this type of collection to the entire territory of Russia. It follows from this that in the next two years it is profitable to acquire residential real estate or commercial properties in small towns and small towns in order to sell them at a very favorable price closer to the time of the introduction of changes.

Conclusions

Do not forget that during an economic downturn, the stability and reliability of foreign exchange funds and other financial institutions drops sharply, unlike real estate investments.

This fact leads to the obvious conclusion that investing in residential and commercial properties is currently the most reliable, profitable and safe means of saving your own capital.

The economic situation in Russia and the instability of its geopolitics do not have a significant impact on this factor. Moreover, according to experts, the current difficult situation on the world stage will soon be successfully resolved. And this means that the most opportune moment will come to sell the existing property on very favorable terms.

Therefore, if you have free funds at your disposal, hurry up to make a profitable investment using one of the schemes we have proposed.