At a time of economic uncertainty, buying real estate is viewed by many as one of the surest ways to preserve and even increase capital. In this article, we will give you some information to take into account if you decide to invest in the real estate branch in 2020.
Return on investment
One of the ways to earn additional income is to buy an apartment in a new building in the initial construction stage and then resell it in the commissioning stage. When considering this option, it is worth studying the current market well: the profitability of these investments, according to the experts, has decreased significantly.
The fact is that, for the most part, developers no longer offer very low prices for apartments in the excavation stage, since they switched to project financing with escrow accounts. Now developers must build houses and residential complexes with borrowed funds, respectively, the cost of interest on a bank loan is included in the cost per square meter.
It is better to select a residential complex for investment, to have information about all the offers in the market, developers, price dynamics, and future expectations of the industry.
Note that in such a situation, it is worth paying attention to exclusive price offers, which include apartments in new buildings from contractors. Suppliers of materials and components often receive payments from developers in the form of square meters at a certain discount, so limited offers appear in the market with prices below normal.
Risks of real estate investments
Any investment is associated with risk, the higher the return, the higher the risk. This rule is also true in the real estate market.
Buying an apartment in a new building at the start-up stage is profitable, but riskier in terms of completing the object, for the investor, the risk will also be considered a delay in delivery dates, suspension of work, returns at the end of the contract.
If you are not ready to take many risks, we recommend that you take a close look at residential complexes in the final stage of construction, when all the monolithic works are completed.
How to choose a developer?
When choosing a developer whose project you intend to invest in, consider not only the current state of the business but also a possible margin of safety.
What type of property to choose?
According to experts, the most predictable is the mid-price segment of the real estate market. Affordable housing can lose its buyers when your income declines, and commercial and premium projects are highly targeted and sold to a limited audience.
Choose apartments in new comfort class buildings, but do not forget that the classification by type of housing is conditional and may be somewhat distorted for marketing purposes.
Rent an apartment
Another option for generating income from real estate is to rent an apartment. The downside of such an investment is a long payback period. Therefore, this approach is more likely to help preserve capital than increase it.
Note that the average payback period under current conditions is 15-18 years. Choose an apartment in a developed area, close to public transport and metro stops, as well as educational institutions; taking into account these parameters, there will always be demand from tenants.
Despite some slowdown in business activity, commercial real estate is seen as more attractive in terms of investment than housing. According to experts, the average payback period is 7-10 years, but much depends on the choice of facilities.
The ideal option, in this case, is when you already have tenants willing to take the meters bought for a long time.
Stages of real estate investment
The ideal option is to buy an apartment at the initial stage of construction. The difference between buying an apartment in the excavation stage and reselling the finished home after putting the house into operation can be up to 50% on average. And if you sell real estate at the stage of completion of the complex, the profit can reach 80-100%.
A less risky Investment is to acquire in the later stages of construction, but even this option allows you to make a profit of up to 30%. In this case, it remains to wait for the delivery of the house, sell the apartment, and receive income.
It should be noted that when looking for an investment object, you must first take into account its liquidity. This is the main factor that contributes to more successful reselling. Investing in real estate in today’s reality is still one of the most profitable ways to make money, as long as you are well informed and the actions are carried out at a steady pace.