Key factors of investment attractiveness for real estate investing
What are the most important things to look for when investing in real estate? While location is always a key factor, there are many other factors that help determine whether an investment is right for you. Find out more about the 7 key indicators of a property's investment attractiveness
Buying real estate is a good step to increase your investment portfolio. However, in order to get the maximum benefit, it is necessary to choose a profitable object for investments. Searching for investment-attractive real estate is a difficult process, especially for entrepreneurs who are investing for the first time.
What should you pay attention to when buying real estate for investment? 7 key indicators of the investment attractiveness of the real estate object further.
Location of real estate
The most important factor in the profitability of real estate investments is the location of the object, in particular, proximity to infrastructure: schools, shopping centers, post offices, parks, playgrounds, recreation centers, etc. The presence of green areas, picturesque landscapes and status of the district are also of great importance.
Proximity to markets, warehouses, transportation hubs, highways, and tax-exempt areas is important when evaluating the location of commercial real estate.
If you are considering buying real estate abroad, when choosing a country, you should take into account the rate of annual growth in the cost of housing and the prospects for the development of the real estate market of the chosen country.
Prospective markets include:
- Turkey - the country has an attractive real estate market, where you can get a high return on investment. The country has a favorable geographical location, a strong economy, the government has developed programs to attract foreign investors, the country has a qualified and competitive workforce, a high level of development of transport infrastructure, moderate cost of doing business. Investors also have the right to obtain Turkish citizenship. Read more about the advantages of investing in real estate in Turkey here.
Most investors prefer to buy business-class apartments in Turkey, because such an investment is a good option, both for living and for investments.
- Indonesia - according to experts, the amount of net profit from the sale of apartments purchased in Bali during the construction phase will be 44% in three years. When renting real estate, you can return the investment in 5-6 years. However, the investor should carefully choose a developer, it is better if he has international work experience. It is also important to pay attention to the type of real estate and the location.
A profitable investment option in Bali is the purchase of premium apartments ANTA Residence Canggu from the reliable international developer ANTA Group, which has been operating in the real estate market for over 10 years.
Useful expert advice
Anton Taranenko is the founder and CEO of Visit Ukraine and Visit World online platforms and the owner of the international development company AntaGroup:
Analyzing the investment attractiveness of a real estate object allows you to assess the advantages and disadvantages, shows how profitable it is to invest in a particular object from the investor's point of view.
The main indicators of investment attractiveness of a real estate object should include the following factors:
1. Location: The location of a property plays an important role in its investment attractiveness. It is imperative to take into account the availability of all necessary infrastructure amenities, accessibility to key facilities and popular areas. To predict the stability of rental income and occupancy, you need to take into account the tourist flow and demand in the chosen location.
2. Possibility of infrastructure development: The development potential of the selected location where the property is located is very important. You need to pay attention to planned and implemented infrastructure construction projects - this is an indicator of price growth.
3. Profitability: Return on investment is important for investors. It is necessary to analyze the rental yield, the potential growth of real estate prices and the possibility of making a profit when reselling the property.
4. Net income: A key indicator is the calculation of net income, which takes into account the total costs of the property, such as maintenance, management, and taxes. This helps to estimate the real return on real estate investment.
5. Favorable tax environment: The availability of tax incentives, such as exemptions or reductions in real estate taxes, can have a positive impact on the investment attractiveness of a property.
6. Risks and safety: Investors usually assess the risks associated with a property, such as legal, financial and natural risks. A safe and stable property attracts more investors.
Of course, these indicators depend on the type of property, location and specific market conditions. It is important to conduct a detailed analysis and evaluation of the property before making an investment decision.
Real estate value
It is important to pay attention to the value of real estate. You certainly have a certain budget within which you plan to choose an object. However, it is still worth looking for the best possible offer that will save you money. It is also important that the price of the object corresponds to the fair market value.
The income you get from your investment property will depend largely on your rental income. The amount will vary depending on the real estate market, location of the rental property, rental demand, type of property, and general economic trends. Before purchasing real estate, be sure to research these indicators to find out the possible benefit.
The price-to-rent ratio, also known as P/R, shows whether it is more profitable to buy or rent real estate in a certain location:
- A low price-to-rent ratio (1 to 15) means that buying a property is more financially beneficial than renting.
- When the P/R is moderate (16-20), it is usually more profitable to rent than to buy.
- A high price-to-rent ratio (above 21) means that renting a property is much better than buying.
This indicator is important for real estate investors because, for example, areas with a moderate to high price-to-rent ratio will have a higher rental demand and are therefore better places to invest.
Occupancy level of objects in the selected location
The last important real estate metric is the occupancy rate, which is an important number if you're looking to invest in short-term rentals. The ratio of the time a short-term rental property is occupied to the time it is available for rent. Occupancy varies by location, seasonal trends, etc.
Analysis of the investment goal and investment horizon
Given the low liquidity and high cost of real estate investing, lack of clarity on purpose can lead to unexpected results, including financial difficulties. First, determine which of the following categories fits your purpose, and then plan your investment:
- Buy real estate for personal use - here you will save on rent and get the advantage of independent living in housing.
- Buy and rent - this provides regular income and long-term appreciation. However, it is necessary to take into account the possible legal complications of renting real estate, the cost of repair work, etc.
- Buy-Sell (short-term) - this is usually for quick, small and medium profit - the investor buys real estate during the construction stage and sells it at a profit after completion.
- Buy-Sell (Long-Term) – focuses on high intrinsic value growth over a long period. This method of investment allows you to get the maximum profit.
Loans are convenient, but be careful about the terms of the loan agreement so that you don't spend your profit on paying high interest.
Insurance is another expense that you will have to subtract from your profit, so you need to know exactly how much it will cost you. If the area is prone to earthquakes or floods, the cost of insurance coverage can eat into your rental income.
Investing in real estate can provide stable income, which makes it a reliable object for investments, the main thing is to find the most profitable location.
Also, before investing, it is important to first choose a good place and see it in person. Therefore, we advise you to visit the country, city or region before investing.
Daria Rogova, Head of Insurance at Visit World
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How to make money on foreign real estate - we tell you here.
Investing in real estate during the war: how to survive in war-torn Ukraine and other parts of the world.
Hotel business in Bali: one of the best hospitality industries.
Reasons for choosing global investment: the power of international investment.
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