Investing in real estate is one of the most common types of investments. Property investment comes in many forms, from buy-to-let to commercial investment.
Real Estate
Real estate is generally a great investment option. It can generate continuous passive income and be a good long-term investment.
Either way, make sure you’re ready to start investing in real estate. First, you need to deposit a reasonable amount of money to start investing in real estate. Buying a house, apartment complex or lot is always expensive, beyond the ongoing maintenance costs you’ll be responsible for, and the potential income gap if you’ve been employed for a while.
In order to assess whether it is the right investment option for you and take advantage of its potential, below we list what you need to know before getting involved in the extremely interesting field of Real Estate.
Why invest in real estate?
With ownership there are two main ways to get performance:
•Tenancy
You can earn income by letting properties to tenants.
•Selling for profit
If you buy property and later sell it at a higher price. Even if you don’t want to buy a property yourself, you can get the potential benefits indirectly by investing in a real estate business.
*There are other related ways of investing, through property maintenance and management services for example.
How much money does a real estate investment require?
Although we have predicted that there needs to be some negligible amount to invest in property, it does not mean that this sector is only for the ‘few’. A few thousand euros is enough to have a good monthly income or to get a house of your own. Moreover, a real estate investment does not mean that you have to buy a villa or a penthouse. In addition, there is always the possibility of a mortgage: Of course, before taking the money from the bank you should have ascertained that you will be able to repay the monthly installments of the loan. But if you have chosen the right property to invest in, especially if it is intended for rent, the rent you will collect can cover your installment to the bank. In this case, consider the 1% rule, according to which the potential rent should be at least 1% of the property’s market price. That is, if the house costs 70,000 euros you should be able to receive a rent of at least 700 euros.
Investment strategies
Let’s take a closer look at some strategic options that can make you a successful Real Estate investor.
• The fix-and-flip investment
It is about taking advantage of houses that are in bad condition and are being sold at very low prices. If you do not have the capital to allow you to make a large purchase but want to invest in real estate, especially if the house is in a good or historic area, its value remains high, and with an estimate of the cost of repairs, you may come out extremely profitable from the market.
• Cash flows
This is the investment that expects the income from the property to be greater than the cost of the property itself. Paying off the loan with rental income rather than appreciation is the primary goal of cash flow investing. While appreciation is an added benefit of cash flow investing, it is usually not considered in the analysis or purchase decision. The long-term goal of cash flow investing is to eventually result in a paid-off property that will generate passive income forever.
• Speculative investment
Investing speculatively means buying a property in the hope that future market conditions will allow you to sell it for a profit. It differs from fix-and-flip investing because you don’t need to make any changes or repairs to the property. However, you can find an engineer/builder and buy a property before it is built, so that the price is reduced and you can finish it when you can.
Real estate speculation is more than a lucky guess. An individual or real estate professional looking to make a profit through Real Estate looks at things like employment, population growth and housing stock before investing. You need to identify opportunities where demand for the property is likely to increase in the future, allowing you to buy low and sell high.
Risk involved in investing in real estate
Property prices and rental demand can go up and down, so direct and indirect real estate investments are long-term. If you’re willing to wait, you can offset losses in a slow housing market and turn a profit again when times are better.
In case the real estate investments are large – if e.g. most of your money is tied up in properties for rent or sale – you may face problems when the housing market is in a downturn. To avoid this, you can diversify your portfolio with different types of investments.
If you still use a mortgage or loan to buy property, there are additional risks:
• There is no guarantee that you will earn enough rent to cover the loan repayment.
• The cost of the mortgage may increase.
• If you don’t keep up with repayments, the bank or building society can repossess the property.
Guide to Investing in Real Estate
Work with a good real estate agency.
If you are sure that you want to invest in real estate, regardless of how you are thinking of getting into Real Estate, be sure to contact an experienced real estate agency that will be happy to answer any questions you may have. A reliable real estate agency is the partner you need in order to be able to evaluate the market. He will help you find the right properties, undertake or even contribute to the negotiations, direct you in terms of financing and generally be your trusted advisor every step of the way.
If you are interested in investing in real estate for sale / purchase in Samos, please contact us.
