8 rules to successfully invest in the real estate market

From the second half of the 90s to today, the real estate market has gone through various phases and experienced important transformations, also following a profound crisis that has lasted for almost a decade.

The various up & down phases of the real estate market have always existed, cycles that normally lasted 4/5 years. Who intends to invest in the real estate market by buying a house, an office, or a property with another destination to obtain an income, will find themselves asking an inevitable question: what phase of the market am I in and what are the medium-term prospects?

A legitimate question to which even professionals will often not be able to answer with absolute certainty. In the last two years, for example, the health emergency due to Covid19 has subverted every rule and every possible logical or statistical prediction in a short time. So, if making predictions trend of the real estate market is difficult, for sure we can suggest some simple rules to successfully invest in the real estate market.

Here are our 8 rules for a successful real estate investment:

1 CHOOSE THE RIGHT CATEGORY AND TYPE OF PROPERTY

Especially if you are only now approaching the real estate market thinking of investing to rent for a medium-long period, you need to focus on categories of properties that are simpler to manage and easier to resell.

These properties are essentially represented by those for residential use such as apartments and houses.

Other property categories, such as offices, shops, and commercial real estate, generally suffer the effects of real estate crises more quickly in terms of both yield and value.

Finally, consider that among the residential properties you will have to prefer those that are most in-demand on the market and that consequently will be able to produce a more interesting income.

2 BUY IN A TERRITORY WHERE YOU CAN EASILY MANAGE YOUR INVESTMENT

If you are starting your career as a real estate investor, it will be much better for you to be able to keep your investment under control and be facilitated in its management from a logistical point of view. For example, if you want to offer the property on platforms such as AirB & B for short rentals, it is essential to be able to manage access and releases to users without wasting time on long journeys.

 A GOOD INVESTMENT STARTS WITH A GOOD PURCHASE

Buying an asset well positioned in the area and at the right price will not force you to “hope” for a market rise to see your investment grow and your property revalue or to obtain a satisfactory income

Always remember that the yield of a property is calculated taking into account the “invested capital” as the first data. You can’t expect to get much higher rents than is normally required in that particular area, so your return will essentially depend on the price you paid for its purchase. 

4 GOOD NEGOTIATION LEADS IT MAINLY WITH MOTIVATED SELLERS

A seller who wants to realize quickly or wants to get rid of the good quickly is your best ally. As is a seller who is not particularly “fond” of the property, because perhaps he has inherited it together with other co-heirs.

These conditions will allow you to make a good purchase, especially if you do not have to make it conditional on obtaining a mortgage.

5 STAY DETACHED

Do not fall in love with a property to the point of being led into a purchase that leaves you no room for negotiations. Always stay focused on the deal, leaving the property in the background. To make a good investment this is essential.

6 THE RIGHT PROPERTY COULD BE ANOTHER

Believe me, maybe the right deal, the most suitable property for your investment is already on the market or will be put on the market in a few days. Don’t think that what you are dealing with is your only and unmissable chance. Haste is not your best advisor

7 CONSIDER ALL THE RELATED COSTS

In evaluating your purchase to be used as an investment, you must take into account every cost that you will have to face (these are also part of the invested capital). You will have to keep an eye on every expense item including the renovation works and the costs for the furnishings.

We recommend for example:

  • to focus on properties that you could buy already furnished, this will allow you to avoid other expenses, to have an immediate income, and to appeal to a wider audience of interested parties to choose from;
  • to prefer properties that do not require major renovations, it will be safer for your investment, because the renovation could cost you more than you thought;
  • to also consider properties in which there is already a tenant, thus taking over an existing contract. Your investment will start paying off right away.

Finally, also consider the condominium management expenses that will be borne by the tenant. Too high costs will force you to mitigate the rent to stay on the market and find interested tenants.

8 YOUR REAL ESTATE AGENT SHOULD BE YOUR REFERENCE POINT

Don’t tackle such an important deal without consulting your real estate agent. He will be able to propose different solutions suitable for the purpose and will be able to provide you with precise information that will help you evaluate and choose your investment to maximize its return.

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