When we talk about a real estate investment, we are necessarily referring to the generation of profitability, the same that implies the relationship between the benefits provided by a certain operation and the investment or effort that has been made, which is usually expressed in percentages.
Any experienced real estate investor knows that not all properties are the same to invest in. Thus, homes that could be perfect to have as a main residence may be unprofitable to rent and cause the owner to lose money. We present a list of things to avoid if you are thinking of buying a home as an investment.
1. Not all properties generate rental income
It is not advisable to invest in second homes or land if you are looking for a return through rental. Some bet on this type of property with the expectation of a rise in value, but there is an opportunity cost that must always be valued. Depositing that money in this type of investment means setting aside other income for having the money stopped, so before buying and waiting for the price to rise, you have to estimate how much money would have been earned if the money had been in the bank, in stocks and/or bonds
2. Any exploitation of real estate can generate losses
If you buy a property of high value, a house on the beach, or a home to rent for vacations you should do well the numbers and costs of said acquisition if you are looking to have a recurring income every year. Buying and operating a rental home generates various expenses that we may not compensate with the rent. Therefore, it is advisable to buy houses as an investment that are profitable from minute one and provide us with income quickly, that is, you have to buy houses at moderate prices and not necessarily in prime areas with overpricing
3. Co-invest with other investors
Properties owned by several people have become popular in several countries. They are a way to diversify a portfolio without having to deal with the hassle of owning and managing properties, but few people have made substantial money from them for the costs and commissions that come with
4. Act as a private promoter
Promoting and developing a real estate project on land is a very high-risk business, ranging from legal, construction, and price, among others. These investments are best made by people with high net worth and experience who may run the risk that they will never see their money again.
5. Condo-hotels, multi-property, and other types of strange investments
Buying a hotel room and leaving it to the manager to manage it or the dreaded timeshares are investments in which there is no ability to predict cash flows, rental income, or the future value of what we buy. In addition, when we want to divest they are difficult to resell
6. Invest abroad
You can buy houses in Canada, the United States, or London because they are powerful real estate markets. But you must always take into account currency risk. That is, if you buy a home in dollars, even if the home goes up, you can have losses if the dollar goes down. In addition, the different laws and risks make them investments in which you have to be very prudent.
Property never loses its value and it is easy to start investing with relatively small capital without the need for a bank loan. However, it is necessary to approach real estate agencies that offer you the greatest legal certainty and have experience in taking care of your investment.
These same real estate companies must have growth plans and information on the investments to be made in the area.
This option presents high profitability, especially due to the expansion of the city towards the north.
If you want support on this method of diversifying your portfolio, consider seeking specialized advice that offers you the best dividends on your investment. However, if your intention is to invest in the long term to achieve a monthly income in the form of rent, or if you intend to reform the house or the apartment to sell it at a higher price, be very careful with the numbers you make. Evaluate well the pros and cons of your investment in real estate before jumping into the pool.