How to Start Investing in Real Estate - Tips for Beginners in Real Estate Investment

 Often regarded as an alternative source of income and a smart business move for those with extra funds, real estate investment can be a daunting prospect for the uninitiated. While stocks and bonds are known to yield faster returns, getting into the real estate game requires a more measured approach. From finding the right investment opportunities to taking on a level of risk you are comfortable with, here are some guidelines to help you curate your real estate investment portfolio.


                                                                Img via Unsplash

1.  Assessing Your Taste for Risk

There is no such thing as a risk-free investment, whether one is intending to deal in bonds and stocks or real estate. And those who are just building their portfolio must get a sense of how much risk they are willing to take on for the sake of future earnings. As when purchasing anything of value, investing in physical properties also carry with it the possibility of losing one's initial investment as well as the prospect of gaining greatly by its resale. If the idea of taking on risk makes you feel lightheaded, it is wiser to steer clear of the property market altogether and put your hard-earned funds in real estate investment trusts. This is the best way to avoid any direct risks as REITs are companies that invest in properties on your behalf and send revenues.


2. Time Constraints

Real estate investors can be a hobbyist or full-fledged pro that is hands-on in every investment opportunity that's made available to him or her. Those who are retired or have time on their hands can take matters into their own hands by purchasing income-generating properties and leasing them out on a short-term basis. Investors who do not have the time to put into expanding or maintaining their investments may prefer to rent out the properties on a more long-term basis or have outsourced the management of their portfolio to a consultant service.


3. Line-Up Your Finances

New investors should also have an accurate understanding of just how much they can and are willing to invest in order to gain future returns. This is due to the fact that bank loans and other financial aid may need to come into play when purchasing certain properties whether it's luxury apartments in Colombo by developers the likes of John Keells Properties or a holiday home in Galle. Your current source of income must be able to manage the cost of these investments while keeping you and your family in the lifestyle to which you are accustomed. Deciding on a clear time frame in which you hope to cash in on the returns will also be useful as the investment period will be clear from the outset.


4. Pick a Market

Most first-time investors struggle with the question of investing closer to home or in a new market that is relatively unknown but is showing growth or offering greater investment opportunities.  For your first investment, it is wiser to stick closer to home as it will give you more inside information and a more comprehensive view of the market overall. While it is possible to manage real estate from a distance, it is not easy to navigate for those who are new to the game. Buying locally is more efficient and effective, in contrast.


5. Going Solo Vs Partnering Up

New investors may find the idea of partnering up with other investors attractive as it provides a sort of buffer from having to face the negative or confusing circumstances that may crop up in a group setting. Those who are considering a group venture should be aware that they will need to compromise on their individual vision and co-sign aspects that they may not be too enthusiastic about. On the other hand, having a team to support your endeavours and to manage the risk as a group can be a great relief.


6. Other Aspects to Consider

Investors who are looking at the property market may be surprised at the repairs and other technical details they may have to look into after purchasing an apartment compound or a household. This is why having a team of contractors, real estate agents, lawyers and value assessors can be useful.


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