10 Tips
for Successful Real Estate Property Investment
by: Rhiannon Williamson
Just because real estate prices seem to have hit a
temporary ceiling in many countries around the world,
that doesn’t mean that profits from property investments
are hard to come by.
Even during a real
estate market slowdown, stagnation or depression profits
can be made locally and overseas. This article shows you
the top ten tips that real estate investors apply to
their property portfolio building strategy to ensure
success from their investments.
1) Research the curve -
the concept of a property market cycle existing is not
myth it’s a fact and is generally accepted to be based
on a price-income relationship. Check the recent
historical price data for properties in the area of the
country you’re considering purchasing in and try to
determine the overall feel in the market for prices
currently. Are prices rising, are prices falling or have
they reached a peak. You need to know where the curve of
the property market cycle is at in your preferred
investment area.
2) Get ahead of the
curve – as a basic rule of thumb, professional real
estate property investors seek to buy ahead of the
curve. If a market is rising they will try and target up
and coming areas, areas that are close to locations that
have peaked, areas close to locations experiencing
redevelopment or investment. These areas will most
likely become ‘the next big thing’ and those who by in
before the trend will stand to make the most gains. As a
market is stagnating or falling many successful
investors target areas that enjoyed the best levels of
growth, yields and profits very early on in the previous
cycle because these areas will most likely be the first
areas to become profitable as the cycle begins turning
towards positive once more.
3) Know your market –
who are you buying property for? Are you buying to let
to young executives, purchasing for renovation to resell
to a family market or purchasing jet to let real estate
for short term rental to holiday makers? Think about
your market before you make a purchase. Know what they
look for in a property and ensure that is what you are
going to be offering them.
4) Think further a field
– there are emerging real estate property markets around
the world where countries’ economies are going from
strength to strength, where a growing tourism sector is
pushing up demand or where constitutional legislation
has been or is about to be changed to allow for foreign
freehold ownership of property for example. Look further
a field than your own back yard for your next property
investment and diversify that real estate portfolio for
maximum success.
5) Purchase price – set
yourself a budget that will realistically allow you to
purchase what you’re looking for and profit from that
purchase either through capital gains or rental yield.
6) Entry costs –
research fees, charges and all expenses you will incur
when you buy your property – they differ from country to
country and sometimes even from state to state. In
Turkey for example you should add on an additional 5% of
the purchase price for all fees, in Spain you will need
to factor in an average of 10% and in Germany fees and
charges can be in excess of 20%. Know how much you will
have to incur and factor this amount into your budget to
avoid any nasty surprises and to ensure your investment
can become profitable.
7) Capital growth
potential – what factors point to the potential
profitability of your real estate property investment?
If you’re looking overseas at an emerging market, which
economic or social indicators exist to suggest that
property prices will increase? If you’re buying to let
out are there any indications to suggest that demand for
rental accommodation will remain strong, increase or
even decline? Think about what you want to achieve from
your investment and then research and find out whether
your expectations are realistic.
8) Exit costs – if you
will incur substantial capital gains taxation liability
if you sell your property investment for profit, will
that render the investment profitless? In Spain a
foreign buyer can incur up to 35% capital gains tax, in
Turkey on the other hand property sales are capital
gains tax free if the underlying real estate has been
owned for four or more years.
9) Profit margins – what
levels of capital growth can you realistically gain on
your property investment or how much rental income can
you generate? Work out these facts and then work
backwards towards your initial budget to work out your
potential profit margins. At all times you have to keep
the bigger picture in mind to ensure that your real
estate investment has good potential for profit.
10) Think long term –
unless you’re buying property off plan and intending to
flip it for resale and profit before completion you
should view real estate investment as a long term
investment. Real estate is a slow to liquidate asset,
cash tied up in property is not simple to free up. Take
a long term approach to your property portfolio and give
your assets time to increase in value before cashing
them in for profit.
