Six Factors to Consider When Investing in Real Estate

Several factors should be considered when investing in real estate. Assuming you are new to the real estate industry, several key factors must be considered. First, if you have no idea about investing in the real estate market, you need ample knowledge to understand what real estate is and how you can benefit from it. The first step of the investment business is research. This article will not elaborate on the basics of real estate investment. Today, I will be showing you some factors to consider before investing in the real estate business.

Location of Property

The top thing one searches for when investing in real estate is the location. It doesn't matter how aesthetically pleasing your house looks from the inside; if the location of your home is in the wrong place, it will be difficult to attract buyers or tenants. A location with greenery, proximity to markets, and a friendly neighborhood is a hotspot for buyers or tenants. If you expect a place like this, consider how the area is likely to evolve throughout the investment period. Doing so will help you gain a clearer understanding of the big picture when investing in a property.

Evaluation of Property

This is the second but one of the most important factors because evaluating a property will answer questions regarding investment analysis, financing during purchase, listing prices during the sale, insurance premiums, and taxation. In a nutshell, evaluating a property helps you decide if a particular parcel is worth your time and money. Compare sales of properties with similar characteristics, list the cost, and determine how the property would benefit you in your income.

Investment Purpose

Identifying your investment purpose is critical to having a successful investment. A lack of clarity or purpose can sometimes lead to poor decision-making, resulting in financial distress. These are some factors that can help decide.

• Buying properties for yourself 
  You can save on rentals and benefit from utilizing the property yourself.
• Leasing your property
  This ensures a regular income with long-term appreciation.
• Buying and selling a property
  It's fast, but the amount you will get by selling a property can be one-time. Once you sell, you won't be able to generate money from the same property.
• For short-term hold
  You make a small to medium profit by buying an under-construction property before selling at a profit after construction.
• For long-term hold
  You may experience significant intrinsic value appreciation over a long period.

Profit and Cash Flow Opportunities

The amount of money left after expenses is known as cash flow. Even after buying and repairing your property, a positive cash flow is marked if you have little money left. 
Develop projections and track for profit, including expected increases in property value, anticipated cash flow from rental income, depreciation benefits, renovation analysis, mortgage loans, and value appreciation.

New Construction vs. Existing Property

New construction typically offers attractive prices, flexible customization options, and numerous other efficient features. However, new buildings are also subject to risks, such as increased development costs.
Existing properties offer faster access to the marketplace and cost-effective solutions; properties can be obtained at a lower cost. 

Optional: Before handling the property, you can review past projects and research more about the construction company. You can also review property deeds, surveys, and appraisal reports for existing properties. Considering monthly maintenance costs, taxes will help you track expenses.
Note: Investing in already leased property requires research. Determine whether the property is rent-controlled, rent-stabilized, or a free-market property.

Credit Score

Your credit score affects your ability to qualify for a mortgage. If you have an "800" or higher credit score, you will attract better loan terms and, as a result, better savings and cash flow.

Tip:
To increase your credit score, pay your bills on time, keep your credit card balance below 70% of the available credit line, avoid closing unused credit cards, and regularly review your credit card reports (use the free mobile app, CreditKarma).

In conclusion
Managing physical properties is not for everyone. If you are looking for alternative investments that allow you to invest in real estate indirectly, consider investing in REITs, real estate company stocks, or mortgage-backed securities.