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One of the most popular investment types is Real Estate. Because of the constant increase in property value, real estate makes for a significant investment with a relatively low amount of risk.
However, just like any other investment, we have to do extensive research and understand the risks. Here we give you five factors to consider if it's the best investment for you.
Type of Property
There are four types of properties we can invest in. Residential property has a lower risk as people always need shelter, but the profit margin is lower. A 5% ROI (Return on Investment) has to be the bottom line for Residential Property investment.
Commercial, industrial and retail properties usually have higher margins and a higher risk of vacancy or no payment of rent during tough economic times. We have to carefully research our target tenants and their needs in the near future.
In the Real Estate world, everything is about location. We have to combine our research of future tenants and their needs with the location characteristics. Transportation, educational centres, and commercial facilities have to be our main research points.
Expected Return on Investment
It is essential to know beforehand what's our expected ROI is. To plan our investment correctly and prepare for any delays, we must research the area rent and sale prices. Putting together your expected ROI and area average prices, we must understand where our investment stands and how risky it is to go ahead. Never be too optimistic about selling or renting higher than the competition.
Real Estate Laws
In Real Estate, we usually deal with big numbers. That means we have to be careful cause any mistake will cost us. That said, we have to know the Real Estate laws, taxes we may pay, and any future developments in a particular area. Here, we recommend hiring a good professional. The fee you will be paying is much less than the potential risks involving a colossal mistake.
By Tasos Bilianides