Real estate is a high-risk, high-reward investment. Here is the secret formula to get real lucky with property investing.
Have you ever wondered why some people have the “golden hands” when it comes to real estate? If they have superstitions or rituals that they follow to turn their real estate investments into profit or equity? If there is a specific property type or amount that they need to invest, or waiting period in order to turn profit quickly?
Here are investment tips to turn your luck in real estate this year:
- Consider the current real estate market.
“Lucky” real estate investors actually take time to understand the real estate market before making any buying or selling decisions. They read up a lot of news sources and/or watch relevant shows about the current state of the property market. The knowledge they gathered allowed them to come in prepared well before they first communicate with a real estate agent or broker.
- Explore different investment opportunities.
Buying a condo for sale in BGC for rental income is not the only investment opportunity. Consider investing in other real estate types such as a house and lot to lease out as a vacation home. Commercial or office real estate, which is pretty in demand nowadays.
If you have an initial aversion to investing big in a property, you may consider crowdfunding a real estate project. You can start with a minimum of P1,000 a share of a project that is managed to an optimum return of investment by a professional broker.
- Spot the “good buys.”
“Lucky” real estate investors usually rely on math to determine if the property is a good buy. Two popular methods are:
One-percent rule: According to this rule, calculate the property’s total upfront cost and then multiply it to 0.01 or 1%. To calculate the total upfront cost of the property, you should include purchase price, plus closing costs. For ready-for-occupancy projects, you should also consider repair or improvement costs needed to make it rentable. If the amount is at or over one percent, then you may consider it as a good buy.
Capitalization rate: There are four figures you need to determine before you compute for the capitalization rate. These are:
- Gross income. You may come up with an estimate based on the current rent prices for similar properties. Multiply the estimated gross income by 11.5 months, allowing a two-week vacancy per year. Deduct this amount from the purchase price.
- Monthly operating expenses. You may also estimate or consult a broker to get an estimated total of operating expenses, which also includes utilities, taxes, and maintenance. Do not include the mortgage payment. Deduct this amount from the gross income to get the net income.
- Purchase price. Divide the net income by the purchase price.
- Multiply the amount you determined prior by 100 to get the cap rate.
- Understand what it really takes to make the investment.
The internet may be a gold mine when seeking opportunities. But it is always best to speak with a real estate professional if you need a better understanding of what you are getting into. Also, understand the risks involved in your investment decision so you would know if you can accept them before making one.
- Listen to your gut feeling.
Sometimes, your first intuition is always right. Trusting your biology can be your friend when information overwhelms you. If you are unsure, you can always step back or reconsider. It is not a missed opportunity if your gut urges you to not take it.
In conclusion, the possibility of “striking gold” in real estate is dependent on how much hard work and learning you invest as well. Knowing what you are doing in any real estate climate will definitely give you an advantage as you will by then know when to create the opportunity.
Want to explore your “luck”? Find your next investment opportunity at www.signetproperties.ph.