The real estate market is known as one of the most profitable ventures you as an investor can have. The profit potential from real estate is endless because there will always be a need for land and housing for residential as well as commercial purposes. Another lucrative thing about real estate investing is that it guarantees positive returns almost all of the time.
This means that even if you invest in real estate property once and forget about it for a few years, you still end up with amazing profits. Of course, realistically speaking, the real estate world doesn’t work with this much simplicity. According to Privy, the real estate market can churn out unbelievable profits for you but only if you consider all the factors that influence this market. As with all investments, it is of the utmost necessity that you do your own research before investing in real estate.
This is because a lot of factors revolve around your real estate investment and affect it one way or the other. Before buying real estate properties or investing in one, it is necessary to get acquainted with these factors. Otherwise, working with a reliable real estate investing platform that can help your source for deals and do due diligence such as RealVantage can help increase the chances of investing in a good property deal. To assist you in that endeavor, in this article we’ll talk about the various factors that are vital to investing in this market. If you desire to be a successful real estate investor, we strongly urge you to read the article till the end.
When it comes to investing in this market, one of the most essential factors you need to consider is the location of your property. Your location can have a skyrocketing difference in the valuation and worth of your property. Depending on where you purchase your property, it can either act as a lucrative offer or as a repellent for your future renters. The latter is very undesirable for any investor that is looking to lease it in the future.
Your locations can very well vary depending on the type of property you are aiming to purchase. To put things into perspective, a commercial property would largely benefit from being in the proximity of busy trading areas. A retail property, similarly, would benefit from a location that has a high frequency of pedestrians and people. And on the other hand, there is the residential property which increases in value by a lot if you have purchased it besides evergreen areas, a good neighborhood, and not too far from the town’s center.
Consider this – You buy a property in the middle of an industrial area, expecting it to attract renters because of the commercial area. However, it doesn’t attract any residential renters and you start going in loss. Something similar happens when you purchase an industrial property in the middle of a neighborhood. Not only would it also incur losses, but most probably you won’t get the permit to build it in the first place.
Thus, it is very important that you carefully look at the location, its surroundings, and its distance from various services and then decide the kind of property you want to sell it as.
Stable income and capital
It’s not new news to anyone that real estate requires a considerable amount of capital from you. In fact, you shouldn’t even expect any returns in the short duration after you purchase your property because there won’t be any. If you are going to invest in real estate, it is our strongest recommendation to fully ensure you have some semblance of a good capital first.
Many people quote Donald Trump for earning his fortune by investing extensively in real estate. What they don’t quote, however, is that Trump would have never been successful if he didn’t inherit his father’s fortune. Our point is, before you even think of being a successful real estate investor, you need to have surplus capital with you. This does not mean that you can’t invest in real estate at all – you can still buy real estate company stocks with whatever funds you have.
It just means that owning a property for real estate would be a distant dream until you have the large capital to fund it. Before investing, ask yourself – would investing in this property set me back financially for the next few months? Can I pay off the loans properly even without receiving any profits from my property? If yes, then congratulations on having a stable healthy income. You are more than financially capable of purchasing real estate and managing it and should definitely do so.
Surprisingly, one of the most influential factors when it comes to real estate investing is your credit score. The credit score you have with your bank account largely reflects the status of your finance and its capability. This, in turn, impacts the impression it leaves on your mortgage lender and affects how much interest rate you can get for your mortgage.
Having an adverse credit score below 750 reflects badly on your mortgage lender and drastically increases your interest rate. Conversely, however, if you have a higher credit score you will be blessed with lower interest rates! There are various ways to do this and with ample research, you can boost your credit score considerably, saving you significant amounts of money when you apply for a mortgage.
Type of mortgage
While we are on the topic of mortgages, it is important to understand their various types and how they can benefit your style of investment. For instance, you might want to buy a property and sell it in a shorter period of time than usual. If that’s the case, you should consider applying for an ARM. This way you can sell the property well in time before the rate starts to fluctuate and pay off the mortgage.
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There is also the zero-down payment mortgage, which is one of the most viable options if you don’t have much capital to pay off the mortgage up-front. However, interest rates are known to be higher on these mortgages so you should be aware of the risks as well.
There are several important factors for real estate investing that you should keep in mind before investing in the market. We hope this article helped you do that and if it did, please consider following our website for regular updates as it will help us out immensely.