Want to maximize your real estate investment? Looking for the right opportunity? Need the right advice for your real estate investment?
Real estate investment is all about purchasing, managing, selling of property such as land, house, REITs, crowd funding to gain profit. Such as giving a house on rent, giving an area as warehouse to a company on rent, investing in lands.
The marketplace for real estate investment is highly unpredictable and uncertain. It can go high at a real fast rate and even go down very quickly. So, the investment must be done carefully and with proper research. This type of investments requires a good amount of patience. Real estate investment should be done with a goal that even if you are not working your investment are working and generating you money.
To gain money in real estate investment you must get a return of at least 8-10%. If you are not receiving your adequate Return on investment (ROI), you should restudy and do thorough research on your investment.
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Real estate depends on the demand and supply of the market. Sometimes an artificial demand is also created.
There are four important elements to maximize your real estate investment:
- Property appreciation
- Tax benefits
- Principal down payments
Cashflows refers to the amount of money received, and the amount of money paid.
Cash income refers to the amount of money received by the tenant during a period.
An investor received Rs 20,000 as his rent from a warehouse which he gave to a manufacturing firm. From Rs 20,000, Rs 1000 are deducted as repair as maintenance charges, Rs 500 as taxes, and Rs 1000 as interest. So, the cash flow amount will be:
= 20,000- 1,000- 5,00- 1,000
So, the cash flow of the tenant will be Rs 17,500.
The main objective of any real estate investor is property appreciation. It means that the price of property increases. The value of your real estate investment must increase over the period. So, make your real estate investment wisely.
Appreciation = Resale value of the property- Original price of the property
Property appreciation is of two types
- Forced appreciation
In forced appreciation, the appreciation is dependent upon the owners of real estate investment/ property. They create this by either decreasing their expenses or by increasing their income or profit.
- Market-driven appreciation
Market-driven appreciation is an appreciation that can be created by many factors such as increasing the jobs in the marketplace, increase in inflation or even increase in the population.
People consider as the property (except land) gets old, it gets deteriorated and the value of the property declines. But it is not the complete truth, a certain amount is calculated and deducted every year from the value of property known as depreciation. With this depreciation, the property becomes eligible for a tax deduction and hence benefiting the individual/ company.
Sometimes people take a loan to purchase real estate investments. Giving your real estate investment on rent can help you in paying off your principal amount. The rental income has lower down your burden and increase your cash flow.
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12 Tips to increase the value of a property:
- Rental income
Rental income is usually a good way to enter the real estate investment world. Rental income provides a good amount of cash inflow to the owner or the landlord. Keep the rents according to the market price!! It is very important to maintain rents according to the market price. With each year increase your price accordingly.
- Property enhancement
To increase the value of your real estate investment you can enhance and improve the quality, standard of your rental place by providing additional benefits and facilities to your tenants.
For example: If you have given a 3 BHK on rent. You can add additional things such as a washing machine or a fridge to enhance quality and then you can upgrade the prices of your place.
- Rent payers
Make sure at the time of renting your property your forthcoming renters have sufficient funds. Find renters who are wanting to shift for a long period of time whether renting a house, warehouse, or even an office. Find renters who won’t delay your payment. You can even check the background of your prospective tenant, so you won’t face any problems in the future. A proper tenant screening is very important.
- Operating expenses
Decreases your operating expenses such as repairs, maintenances, taxes. Takes your decisions wisely- Is there a need for renovation??
Are delaying your necessary repairs? If you are delaying your important repairs such as electrical repairs, it can lead to electricity shortcuts resulting in higher costs.
Are you delaying your taxes? Delaying in paying your taxes can result in fines.
You can even use low electricity consuming bulbs such as LEDs.
In the case of real estate investment, the highest expense is of property tax. Make sure you fill in the correct amount of tax by properly valuing your property. Make sure you do not make any clerical mistakes. Make sure you file your tax payments on time to avoid penalties. The tax on property depends on the value of your property i.e., higher the value of your property, higher the tax and vice versa.
You can consider your tenant as the owner of your real estate investment for a fixed period at a predetermined price. A lease agreement turns out to be a beneficial investment decision. A lease agreement will allow consistency in your cash flow for a long time.
- Benefit from your taxes
You must know your taxes and how you can get benefit from the taxes you pay as the owner of the property. There are several sections such as section 24, section 80, depreciation, capital gains that can benefit the investor.
Try to be more social and outward. Engage yourself in groups related to investments, properties. These groups can be very helpful as well as insightful. with the help of these groups, you might be able to crack an investment or even a single piece of advice can help you.
Management of your property is a very integral part of real estate investment. The investor needs to properly manage his/her assets. The investor should consider his investments like a business. Stay connected with the market trends when he can suffer losses or which type of investment can make a fortune.
- Don’t be resistant
Sometimes owners become resistant to their property or land. The real estate investment market is very unstable. The surroundings of the land or the property are very important. The property must be brought to an area that is growing, grown, or has the potential to grow in the future, this will only result in your property enhancement. If the area around your property is experiencing downfall, then sell the property as quickly as possible
Patience is of real importance in the case of real estate investment. It is a slow process. You won’t be a millionaire or a vagabond overnight. You need to do a significant amount of research and study while buying a property and even after buying the property you need to maintain a check if the property will grow or may have a downfall.
Whenever you decide you invest in a particular real estate investment don’t rely on 3rd person’s work. Instead do a thorough check on facts and figures, the future of the investment, nearby surroundings of the investment.
A last piece of advice for our readers: Buy your real estate investment during the recession or during the beginning of the boom period and sell off when the prices are at its peak giving you good returns on your investment. Hope you enjoyed this post on real estate investment, let me know what you think in the comment section below.