Real estate as the key investment tool
Part 1
Rate of Return on Real Estate
In any economic environment investing in real estate is the best option for any investor. The real estate investor when undertaking his or her decision to invest should seek proper advise from an expert in the field of real estate to identify the best option available. Therefore, the investor can properly work on the return on investment. If proper advise has not been obtained, investing in real estate as a whole will not generate the rate of return one is seeking. For instance, buying a land is investing in real estate, however, where you buy the land is a critical factor. This is where individual investor can make a serious mistake. Real estate investing is a science of its own. One should not underestimate the science behind the advise provided.
Investment Mix
The real estate market consists of a substantial mix of investment options, which would furtherextend to what is called the property type. For example, rental property income based commercial properties, single family homes, real estate investment trusts, real estate crowdfunding platforms, and the lists continues to expand. Our research within the real estate industry across different countries and markets have shown that physical property or bare developed land is the most suited as the strongest investment option. Some argue that this does not generate any forms of passive income. Although, the answer to that is ‘Yes’, the return on the passive income yield will generate negative returns when purchased for instance with a house. This in turn will bring down the strength of ones investment portfolio. Furthermore, purchasing land will enable one to work closely with their taxable income.
Research Based Approach
Today, there are key real estate pockets where the property prices are still under valued, whereone has the opportunity to enter and enhance their real estate values. These strategic investments will hedge against the rate of inflation, and further provide real estate benefits. In light of the above it is imperative that potential investors explore these opportunities via highly research based real estate companies and real estate developers who possess in-depth information on markets. Furthermore, specialised real estate agents will also possess substantial research based information on the real estate market, thus providing access to investment properties. Global real estate organisations, real estate investment banks, real estate investment funds and other research based institutions also provide detailed reports on real estate property. The reports highlight for example the financial performance of housing markets, favorable cash flow properties, future investment properties, multifamily properties, single properties, short term rental properties and even short-term vacation rentals.
Financing Options and Tools
Moreover, the real estate investor is exposed to numerous real estate investment tools and financing options for purposes of financing their investment such as mortgage payment methods, acquisition financing and equated financing models. All these measures assist not only the real estate investor but the property owner as well. In this process we cannot only look from the perspective of the investor or the purchaser of property, however, we need to consider the property owner, professional property managers involved, and the banking system as a whole. The holistic approach is the most vital aspect.
Overall Economic Sentiment
The overall economic sentiment within the country plays a pivotal role in determining the progress of the real estate industry. This can be argued from a comparative market analysis based perspective between developed and developing countries. The manner in which the industry reacts to economic twists such as inflationary pressures and construction costs is very different. At this juncture we should not embark on trying to scrutinize the reaction of the market from a developed and developing country point of view as it definitely deserves a more comprehensive article. Nonetheless, what has been brought forward here is the manner in which the country’s socio-economic environment plays a significant role in shaping and re-shaping real estate.For example, areas that are largely affected include the obvious but not limited to the market value of actual properties, operating expenses, cash return, monthly cash flow (monthly income), fair market rents, capital values, city level entry prices, cost items, labor cost, capital gains and property taxes.
Closing
The most imperative aspect is that a real estate investor should embark on a very informative decision on their potential investment. Many fall to the easiest option which is human nature to see what the rental income would be. The rental income determines the potential return, then the decision has been made to purchase the property. This has been witnessed over centuries and ones real estate portfolio is filled with only passive income generators such as rental income whether it maybe commercial properties or otherwise. As a result, an individual should do a comparison between properties, investment portfolios and reports as mentioned and move ahead with a more informed in-depth decision or seek proper real estate advise from the experts who study the science of real estate investing daily.
