Every person can invest in both residential and commercial real estate. At the same time, in order not just to lose them, but to make them work, it is necessary to choose an investment strategy: short-term or long-term. The payback period of your purchase will depend on this.
A short-term strategy assumes that you buy, for example, an apartment and sell it after a while at a higher price. If you have correctly matched all the liquidity facts, then you will make a profit pretty soon.
As part of a long-term strategy, you buy an object for the purpose of its subsequent leasing. It turns out that the payback period for this purchase will be slightly longer, but a stable monthly income will be a significant advantage. “If we talk about housing, the most profitable options for this investment method are apartments with ready-made finishing from the developer or apartments. This choice allows you to save time and money for repairs and start looking for a tenant as quickly as possible.
What properties should be met?
The main factors that should be taken into account when choosing an investment object are the prospects of the project location (which may be opened in the area in the near future), its transport accessibility, the provision of infrastructure facilities and the very characteristics of the living object (architecture, design of public spaces, landscaping of the local area, etc). And if the latter can be considered on a leftover basis, then the same proximity to the metro / public transport stops, the presence of shops, schools and kindergartens in the area will always be useful and in demand.
The layout of the apartment also plays an important role. For renting, for example, the best option may be a studio, a functional one-room apartment or one- and two-room euro-format apartments with combined kitchen and living room areas.
Are there any risks?
The main risks of buying a primary home for investment purposes are the developer’s bankruptcy, missed construction deadlines and long-term construction. These risks can be minimized by carefully choosing a company and real estate object, checking title documents, paying attention to the general contractor who works at the facility. Often the delay in construction is due to the latter’s fault. Also, do not chase cheapness. A low price or large discounts may indicate that the developer has financial difficulties.
Secondary housing as an investment object
The second home investment scenario is similar to that of the primary market. Here you also need to choose an investment strategy, take into account the facility location, the nearby infrastructure and existing repairs. In the secondary market there are many small and scattered players who may misinterpret the situation and sell their properties at a lower cost. This gives you more opportunities for a bargain purchase. Therefore, it is important here to carefully monitor the proposals.
As for the risks when buying an apartment on the secondary market, the main ones are the seller’s incapacity, sale of housing by proxy, multiple resale, illegal privatization, uncoordinated sale (in case the apartment has several owners), debts in payments for overhaul. Regardless of whether you are buying a home for your own residence or as an investment, all these points need to be checked before making a deal.
Bankruptcy trading
Another possible option for purchasing residential real estate as an investment is collateral objects or seized property, property of bankrupts. Basically, this category includes housing, mortgage obligations which could not be paid off. The sale of this property is carried out at prices below market prices, which already initially gives a chance to make money on resale. The liquidity of such objects is high, and the payback period is less than a year.
What if there is no large free amount to invest?
Not having the right capital on hand, but wanting to increase profits, draw up an investment plan and follow it with discipline. At the first stage, half of the initial amount can be paid in a replenished deposit at interest, the other half can be spent on shares. After the first stage (do not forget to determine its duration: a month, half a year, a year, etc.), take the money and invest in the site (also for a certain period, during which you will also save funds). At the end of the second stage, sell the plot at a higher price and use the proceeds + accumulated money to make a contribution to shared construction or immediately purchase the object.
Please note that this is only a rough example of a possible plan. The specific option must be compiled independently, based on the available resources and wishes.
When to invest?
The most favorable time for investing in real estate is the crisis. During a slowdown in the economy, property prices tend to drop markedly. Apartments that have fallen down in price during the crisis are the most attractive investment option for owners of full free funds. Usually, a couple of years after the crisis, the economy begins to recover and, accordingly, housing prices are also growing. Obviously, the more the price rises, the more profit the investor expects.