The housing market is showing an upward trend since the beginning of the year after a lull of past quite a few months. And, despite the shaky confidence of the property owners post the traumatic experience in the North America in past two years, the interest in investing to real estate has not diminished. In fact during this very phase, while property prices dipped considerably, wise investors eyeing long term gain made some attractive investment decisions. However, to make such smart moves any investor needs to understand the dynamics of the real estate market.
Acquisition of Properties
Real estate assets are expensive. An investor hardly ever pays an entire amount out of his pocket for purchasing the property. Bulk of the expenses is borne by the financial institutions through mortgage loan collateralised against the property. This is also true for general buyers shopping for homes to live in. In case the purchase of the property is being made on a foreign land there could be considerable legal hassles involved. This requires expert intervention of real estate attorneys with knowledge of the laws of that country.
Sources of Information for Potential Buyers
The typical sources of information for potential purchasers are market listings or commercial information exchange, real estate agents / brokers, banks (for bank owned properties), public auctions in case of foreclosure sales, private and informal sales information and government entities like Fannie Mae, Freddie Mac etc. Once a property has been located for ownership and / or investment please have an independent assessment done on the quality and resale value of the same.
Capitalising on your Property
For an investor this phase of research should ideally start before the determination of the property itself. This is also true for home owners who are willing to monetize their second home or holiday residence. Do calculate net operation income (NOI) carefully. Net operating income is the difference between your earnings from all sources including the rents etc and the recurrent expenditures involved with the property. Expenditures generally include maintenance, taxes, utility bills, legal fees etc. The few ways a property could be used for generation of income are,
this is generally the popular most option of capitalising on a property. The space could be rented out both for private and commercial purposes. In countries like Germany, this is a lucrative option of monetizing a property.
With the rise of market price a property could yield substantial revenue in time. This however is very unpredictable in nature. Also, the property needs to be continuously tended with improvement plans for a true appreciation of its value during future sales process.
Tax shelter offsets
This again is subject to prevailing laws of the land. Tax shelter benefits are transferable.
Points to Ponder
Whether you are searching for a cosy space to move in with your family or an investment option there are few things that you will always have to take a note of. While buying personal residences factors like availability of space, amenities, neighbourhood, ease of accessing public transport system etc are generally well thought of by the potential buyers. But along with these do carefully screen the tax history of the property, calculate insurance coverage, recurrent charges to be paid on utilities, sewage, water tax, other fees etc. The same is applicable for real estate entrepreneurs too. The cost of renovation of an aged property should also be taken into consideration. The resale value of the property may also become important with time. This is particularly applicable for private house owners who shift base for business or personal reasons after a few years of stay. At any rate, the sole emphasis should not be given on the value of the locality itself. Charting out a sound exit plan is also essential, in case, your property fails to yield expected return or your interest shifts from real estate investment. It is generally beneficial to seek expert assistance, particularly for the first time buyers. Advices from specialist lawyers and accountants can ease up the hassle. Do ask as many questions as possible before signing of the documents.
People who can hold the aces for longest possible time usually make the greatest profit through real estate investments. This is considering the property has been kept in fine condition. Investment on real estate is by no mean a ‘get rich fast’ scheme and the patience of many years may be required to have the expected yield. But the fruit of the patience may often turn out to be sweeter than many other investment schemes.
Nigel Walters is a talented blogger with a passion in helping people. He helps people with his knowledge of investment, stocks and the property market. He has been writing for quite a few years now and blogs for a number of different sites and magazines, one of these being Emerald Bamboo Forestry Investment.