Deciding on where to invest your money is one of the most important parts of the entire investment process. Real estate has always represented an excellent investment option and recent surveys have suggested that over time it has been one of the best returning investments, surpassing stocks and bonds.
Almost all banks and investment managers are forecasting that 2018 will be a more volatile year with low interest rates and stocks and bonds taking significant hits and as a result real estate comes across as the best option for investment due to its security and stability as a tangible asset.
That being said although real estate can provide ‘passive income’, in reality there is nothing passive about it. To generate strong returns, investors need a significant amount of real estate knowledge and experience as well as being prepared to put in plenty of effort to realise their returns.
So what does it take really to be successful with real estate investing?
To get you started, here are 5 key things to keep in mind before investing in real estate:
It seems that many parts of the world are turning into rental cultures: rents across a number of major property types are predicted to see some healthy growth in 2018. This means that if you were to invest in real estate today then buy-to-let is seemingly the best option. This benefits real estate investors because they receive rental income from their properties over the course of the investment period – stronger rental markets means better rental income.
Whilst many people take into account national, regional and local variables when considering real estate investments, it is often more complicated than that. Each property has unique characteristics that make them difficult to compare to other seemingly similar properties. Knowledgeable and experienced investors are able to assess these hidden features and to identify properties that will receive significantly preferable returns.
You may have heard that low mortgage rates make it a good time to invest in real estate and take out mortgages. Whilst this is true to a point, it already seems that mortgage rates are on the rise and you therefore need to consider what happens when repayments begin to increase. As mortgage rates increase many people may find themselves unable to make repayments and suddenly attractive rental returns become negative.
Whilst the idea of monthly rental returns may sound appealing, are you ready to put in the work required to realize those returns? You will need to seek out tenants, make sure that you have the time to manage the property and are prepared to deal with any issues and breakages that may arise. One element that many people don’t realize is the paperwork required for owning a rental property, you need to keep on top of the monthly incomings and outgoings as well as being aware of different taxes and payments required for buy-to-let property.
Whilst it may seem like a good idea to find out the amount you can afford to invest in real estate and use that to buy a single property, it is sometimes not always the case. In order to reduce the risk of having all of your capital in one property or in one city or one country it is often a better bet to try and purchase a number of smaller properties in different locations. Whilst real estate is generally a secure and safe asset, there can be some risk associated with currency fluctuations, political upheaval, natural disasters and even changes to local rental markets. Therefore if you are able to own properties in multiple locations you mitigate this risk and should one of your investment properties see lower returns it will impact your total returns less than if you had all of your investments in that property.
October 07, 2019
Cash flow and appreciation: why both are important to investors
If you want to build a portfolio that serves your short and long-term goals, it's important to consider the type of returns your investments can offer you. In the real …
Why should you invest internationally? The benefits of a global portfolio
In today's globalized world, it is easier than ever to invest overseas. The question is, does investing internationally bring good returns? We believe it does. Diversifying your portfolio across various …
5 common mistakes when investing in real estate
Real estate investing has the potential to generate attractive returns for both first-time and experienced investors. Property tends to be a stable and consistent investment strategy that has traditionally outperformed …