Real estate has long been an attractive form of investment. Strong and stable returns, along with the familiarity that comes from property, are key selling points. But traditional real estate investment isn’t always as straightforward as it seems.
Deciding where to invest your money is one of the most important parts of the entire investment process. And real estate has been a profitable choice for many years.
Although both real estate and stocks can suffer from market shocks, the former tends to remain the more stable investment – particularly during times of uncertainty. Good rental properties are still sought after when economies are struggling, and having a tangible asset means its value is based on more than market sentiment. That said, traditional forms of real estate investment can drain your time. To generate strong returns, investors need to be prepared to put in plenty of effort and investing experience to realise their returns – something crowdfunding seeks to avoid.
So, if you’re thinking of making it in the real estate investment world, here’s what you need to bear in mind when it comes to choosing the right kind of property.
1. Global real estate markets show strong resilience
Although worldwide uncertainty does affect the global real estate market, property prices have historically bounced back. For example, despite widespread uncertainty in 2020, CBRE predicts 2021 real estate growth to be 3.4%. Investors may be concerned that the value of their properties has dropped, but they have the option of holding on to them while prices recover. To that end, buy-to-let remains the most attractive option because you can benefit from the rental income while you wait for the right time to sell.
2. Real estate investment requires professional due diligence
Many people take into account national, regional and local variables when considering real estate investments, but choosing the most profitable property is often more complicated than that. Each property has unique characteristics, making it difficult to compare to other seemingly similar properties. Knowledgeable and experienced investors are able to assess these hidden features and identify properties that will receive significantly preferable returns. That is why the crowdfunding route can prove the most rewarding type of investment. A team of experts has assessed the opportunities for you, carrying out the extensive due diligence needed to select the most lucrative properties.
3. Mortgage rates do fluctuate and can present a significant risk
Even when mortgage rates are low, taking out a loan to invest in real estate carries a risk. If rates sharply increase, you could find yourself paying more for the property that you had intended, which can make a considerable dent in your profits.
That is not to say that you need to be a cash buyer to enjoy returns from the property market. Opting for crowdfunding means you can invest small amounts without needing to take out a loan.
4. Living the landlord dream or nightmare?
The idea of monthly rental returns may sound appealing, but traditional real estate is a serious commitment. You need to seek out tenants, manage the property and deal with any issues that may arise – and the cycle continues as tenants come and go.
Another 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 and stay aware of different taxes, payments and laws applicable to buy-to-let landlords. When you are thinking of investing in property outside Latin America, you might not be familiar with the various legislation overseas, and it helps to go through a platform that takes care of all this for you.
5. You need more than one investment to mitigate against the risk
For new investors, starting with a single property investment seems wise, but it might not be the case. Having all of your capital in one property, city or even country can leave your investment vulnerable to local market shocks, currency fluctuations, political upheaval and even natural disasters. Therefore, it is often recommended to purchase a number of properties in different locations, which can be difficult if you don’t have large sums to invest.
By pooling your money with other investors, however, you can spread the risk across lots of properties and markets to mitigate against local volatility.
Making any property investment is a decision that requires a considered approach. To find out if crowdfunding real estate could be the right option for you, explore how the process works using the Bricksave platform.
March 08, 2021
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