Many people buy a property because it’s cheap or because someone they know recommended it, but later on, they end up not knowing what to do with their ‘investment’.
Decide if you’re buying a property for the purpose of getting a rental income, to profit from appreciation, for flipping or for development. Build an investment strategy first, and then find the right property for it.
Why invest in real estate? Here are some advantages:
1. Financing
In many cases, if you’re qualified, the bank will be willing to lend you the money to acquire a real estate property.
Yes, you will still need to come-up with the down payment, but the bank is willing to let you pay the remaining balance over a long period of time.
2. Rental Income
If you pick the right property, you can enjoy the predictability of a monthly rental income.
If you’re investing in a condo or in an apartment, make sure there’s no oversupply of the same type of property in the same area.
The law of supply and demand will dictate the rental rate and the occupancy rate. Invest in a property that has high demand, but is scarce or hard to find in the area.
3. Cash flow
Again, if you’re diligent enough, there’s a chance to find properties where you can earn a rental income that’s greater than your monthly amortization. The net difference is the money you can keep and use.
This is not easy to do, but with diligence, research and the right financing structure, it’s workable.
4. You can keep your day job.
Owning an investment property won’t take much of your time after you’ve set it up. The key is to find the people who can help you monetize your investment.
Work with brokers who can bring tenants for your property. To make your property more appealing, hire an interior designer, a consultant, or you can also research and do the work yourself. A reliable handy man on call will save you a lot of time and trouble as well.
5. It’s scalable.
You can’t do ten day-jobs, but you can own and manage at least ten properties by yourself.
6. Value Creation
With creativity, an outdated property in a good neighborhood can increase in value by…
• renovating the interior and exterior
• adding a room
• landscaping
• furnishing
• earning a good rental income
You’ll make a substantial profit when the increase in value (perceived or otherwise) is greater than your acquisition cost and what you spent for the improvement.
The key is to be diligent enough to look for a bargain. Always remember, the profit is made when you buy, not just when you sell.
7. Most real estate properties will appreciate in value.
I say “most” because there are properties that are slow to appreciate or don’t appreciate in value at all.
Remember, location, location, location. Buy a property where the prime developments are happening, or better yet, buy where it’s headed. These are the new places where malls, schools, offices, churches or new roads will be built.
8. It’s tangible.
Unlike other investments, real estate is something that you can see, feel and touch. You have complete control over the property.
9. You can use it as a collateral.
You can use your property as a form of security to get a loan.
10. Your property is illiquid.
Unlike stocks or bonds, converting your real estate into cash may take months or even years to do. And that can be seen as a disadvantage or an advantage depending on your objectives.
If your goal is to save or to prevent yourself from spending your money irresponsibly, put your money in real estate. That will surely do it.
11. Better returns in the long-run
In the long run, if you decide to sell your property, chances are, you’ll get a better return as compared to just keeping your money in the bank, especially if you consider inflation.
12. Legacy
You can pass it on as a legacy or an inheritance to your children and your children’s children.
- copyright www.marvingermo.com
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