Investing in residential real estate is a reliable option to generate income. But like any branch of business, it has nuances, knowledge of which will help to avoid financial losses. There are various types of investment in real estate, their analysis and study will allow to use the potential of the market with maximum benefit.
One of the tools to save capital from the influence of inflation is the purchase of housing. Such an option to receive passive income is associated with a low risk of losses and is included in the mandatory list of the investor’s portfolio. In contrast to this market segment, increased requirements are imposed on commercial properties. To achieve success, it is important to use various tools for work and methods of generating income.
Professional investing involves careful planning. So you can avoid mistakes when you have to operate with amounts of several million rubles. Despite the nuances, the infusion of finances into real estate has a lot of advantages:
1. Depending on their capabilities and preferences, the investor is provided with a wide choice of residential, foreign, commercial real estate properties.
2. The high cost of properties is practically not affected by crises, which significantly reduces the risk of investment depreciation during inflation.
3. Real estate renting in a long-term or short-term lease is a stable passive income.
4. The prices of properties regularly increase, which in the long run increases profitability and reduces the payback period of investments.
5. At the first acquisition, there are tax benefits.
6. Buying properties on credit allows you to save money in the event of a decrease in the exchange rate of the loan.
Different types of real estate investments have disadvantages:
1. The quick sale of properties is possible only with a significant reduction in cost, which reduces their liquidity.
2. The operations of buying and selling real estate are accompanied by bureaucratic processes that take a lot of time and financial costs.
3. The influence of the state of the economy on the pricing policy of properties.
4. The average transaction price tag is several million rubles, which requires a certain level of capital from the investor.
5. The owner of the property incurs additional costs for repairs, utility bills.
6. The market value of the propertу may or may not increase to the expected level.
7. In the case of a sale earlier than 5 years from the moment of the acquisition of real estate, you will have to pay income tax.
8. Force majeure situations affect the fall in value: the construction of industrial enterprises nearby, the economic crisis and others.
It is difficult to predict and prevent all risks, but it is important to choose real estate based on these factors.
Minimize potential losses will help develop an investment plan.
You need to start with real asset valuation. This will allow you to choose an affordable type of investment in the selected property, designate a plan of action. With limited capital, there are two options for financial investments: the acquisition of land or housing at the initial stage of construction. Another solution is housing cooperatives or partnering.
A preliminary study of market features will allow you to predict development trends and profitability. When looking for the best investment option, consider:
● thepropertylocation;
● theinfrastructure of the area;
● road junction;
● level of ecology.
Determine which income option you would like to receive: resale of the property or renting out.
It is possible to return investments in the sale of apartments, after the completed construction of the house, in about 2-3 years. Rental income will help offset the cost of the acquisition for 8-20 years, depending on its purpose.
There are several options for how to increase the value of the propertyand the return on investment:
1. Redevelopment or division of the total area into several rooms.These decisions will increase the value of the propertyby 15-25%, with the rental income will increase by 1.5 times.
2. Extension area. This option is ideal in private homes, for an apartment it can be realized by combining a loggia or a balcony with a kitchen or a room.
3. High-quality repair increases the cost of the propertyby 15-20%. If the construction work will be carried out on its own, you can also save.
4. Change the purpose of the propertyby transferring residential real estate to commercial or warehouse. A striking example of such a solution is the apartments on the first floors, which have turned into shops or lofts as the second life of industrial premises.
There are two main types of real estate investing:
1. Facilities for living, permanent or temporary. This includes apartments, houses, apartments.
2. Property for commercial use. Represented by land for construction, industrial premises, shops, shopping and entertainment centers, office real estate.
For novice investors, the best solution would be residential real estate. Operations are carried out in two directions: in the primary market and with propertiesof secondary housing. In the second case, the income to get faster — no need to wait for delivery at home or spend money on repairs.
When investing in the commercial real estate segment, it is important to understand the interest in the propertyin the context of business:
● pay attention to the availability of communications, premises for a warehouse;
● evaluate the convenience for the movement of freight transport;
● check parking availability.
For various types of investment in commercial real estate, you must have 7-10 million rubles. Due to the high cost of rent, the return on investment is possible from 6 to 8 years.
Investing in land is divided into short-term and long-term. The first type includes the area under construction, the second — farmland and industrial zones.
The advantages of this type of investment:
● no spending on utilities;
● taxes on lower than residential and commercial real estate;
● land plots do not need repair or maintenance;
● the procedure of registration of the acquisition is simplified.
When selecting an option for investment, it is necessary to take into account the Land Code. His article number 49 states that land that is of strategic interest to the state may be taken from the owner.
Despite some risk, investing in real estate at the stage of its construction has a high level of profitability.
From the moment of laying the foundation and before putting theproperty, the price increases by 8-10% at each stage of construction.
Another type of investment in real estate — mutual funds. These organizations are engaged in the preservation and multiplication of investors’ capital. All management issues are in the hands of professionals, so you save time and effort. The share can be purchased at a price of up to 300 thousand rubles and in various segments of real estate: commercial, residential, and warehouse. Such investments are the optimal solution with limited small capital.
The foreign real estate market has its own characteristics related to the legislation of the country, the subtleties of demand. Therefore, novice investors are not recommended this type of investment.
Popular propertiesare apartments, houses in resort and tourist areas. It is also possible to invest large propertieswith several people or companies.
Despite the high profitability of this property, it is influenced by seasonality, unlike propertiesin large European cities, where there is a constant flow of tourists.
In order to choose the best type of investment in real estate, it is important to carefully work out the market, analyze the specifics of a single segment. Be prepared for costs and force majeure, start with small propertiesthat do not require large investments.