Important Factors for Real Estate Investing

For decades, real estate investment has remained a proven and trusted choice. Currently, there are modern and digital options available, so real estate is still relied upon by many investors as the go-to asset.

You can be assured of consistent rental income, appreciation in value, and stability despite economic fluctuations.

However, before you put your money in real estate, you should know what to be on the lookout for. You should also know the key determinants that would guarantee success for an investor.

In this article, the professional and reliable team from Gifford Properties outlines what a new landlord should be on the lookout for. Keep reading to learn more!

Location

The most important contributor to the success of any real estate venture is the location. For you to enjoy the full advantages and benefits of real estate investment, you have to identify the ideal location for your property.

If you want to attract more potential tenants, it will depend on the amenities you provide, the services, and the facilities in the neighborhood.

We recommend taking a middle to long-term assessment when reviewing a potential area’s investment. While you can appreciate an area’s location now, there is always a possibility of zoning reassessments which will change the use of the area, especially in terms of density.

a hand handing a document to another hand

You can request such information and ask questions on possible zoning changes at the municipality office. Invest in an area with some level of stability unless you are looking to take advantage of the rezoning policies.

Property Valuation

Valuation involves evaluating a property's worth on a specific day, accounting for multiple factors and implications.

A property valuation is undertaken by a registered and trained professional. The valuation will be key in purchasing, insurance, property taxation, and investment analysis.

Depending on the nature of the property and the purpose of the valuation, the registered appraiser will use the most appropriate method. There are three key methods considered in the valuation of property:

The Sales Comparison Method

This is the most common and used method. It involves an analysis of similar-sized properties in the neighborhood of the subject asset.

The comparables used will be similar in size, amenities, and in more or less the same condition. An appraiser/ valuer will make some adjustments to come to the final figure.

Cost Method

This valuation method is mostly considered for uniquely constructed developments. It involves analyzing the value of the land separate from the cost of putting up a similar development while considering depreciation, whether physical, economic, or functional.

Income Approach

computer on a wood desk next to a notepad and a cup of coffee

This method is used mainly for income generating properties where the income spread of the property is discounted to present value.

Purpose and Holding Period

The property market is not as liquid as the other investment markets. To make the most of the property market, it's important that your investment goals, needs, and how long you plan to hold onto the property all line up. If they don't, you could find yourself short on cash before long, and even facing foreclosure.

There are several reasons why you will find yourself investing in a property:

  • Buy for personal reasons: This is intended for personal use, allowing you as the owner to get the most out of the asset. You'll save on the rent you'd otherwise be paying.
  • Buy and lease: Many property owners view this as a choice for long-term ownership. Before you decide, it's essential to also assess the management type, since it greatly influences the success of your investment.
  • Buy and sell: This choice is perfect for short-term real estate investments. You might buy off-plan or in emerging areas, selling swiftly for profit when the market improves. Alternatively, some employ the same buy-and-sell strategy with a long-term view, seeking both rental income and property appreciation gains.

Cash Flow

As you might have figured out, property is quite a unique investment type. However, that doesn’t mean that it doesn’t follow the norms of any investment or business. Hence, cash flow is important.

calculator with money around it

When you identify the ideal investment type, we recommend that you assess the financial viability of it.

Assess the following:

  • Rental income stream from the property and other facilities (parking, vending machine, etc.)
  • Rental reviews
  • Expenses breakdown: mortgage repayments, taxes, management, etc.

This allows you to assess the optimal financial viability from a cash standpoint.

Leverage

Given the significant price tag of property, it's important to recognize that many property owners can't afford it outright. Instead, they often rely on different investing methods to finance their property. Convenience aside, loans come with their own costs.

Some people can also afford to buy the property in cash and would rather do so.

You must possess financial expertise to select the most suitable decision for your property whether it’s loan terms or cash. Additionally, understanding the consequences of failing to meet mortgage repayments is crucial.

Conclusion

Real estate can be the ideal investment for the prudent investor looking to diversify their portfolio and grow wealth. Property investment can guarantee you a steady flow of income, appreciation, tax breaks, and many more advantages.

For property investors looking to invest in Fleming Island, you will need some guidance in selecting and managing the best asset. Our team at Gifford Properties is best suited to meet your property needs.

We are the leading property company in the area known for our professionalism, our expertise, and our knowledge in the local neighborhoods. Our honest service and in-depth knowledge will give you the upper edge as you start your real estate journey.

Get in touch with us today!

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