” Landlords grow rich in their sleep”
J.S. Mill
The background
Real estate has historically, and to certain extend remains the most attractive asset class to retail investors. Many reasons can explain that: investing on the market is associated with possessing some “extra” knowledge, often people prefer to invest in something they can physically touch, real estate is perceived as a low risk asset class. The current extra-ordinary financial environment – low interest rates, increased money supply, low inflation has lead an extraordinary amount of capital enter the real estate market.
How can you invest in real estate?
Broadly speaking, there are two ways of investing in real estate: direct and indirect. Direct investments are those that you pick choose and manage yourself (i.e. you buy and rent a flat or a shop). Indirectly, you can participate in the real estate market by buying a share in a REIT or even having a a couple of shares or bonds in companies that are active in the sector. The most significant difference lies in the exposure you can take. When you choose to invest directly, you can easily leverage your exposure with a mortgage, where when choosing to do so indirectly it can be more difficult.
The methods
It is important to know that direct real estate investments are long term and capital intensive. Also, contrary to what many people think real estate prices does not always go up. They fluctuate more so with the record low interest rates. Having noted the above, when you have decided to invest in this asset class there few methods you can follow. Brian Tracy has got an approach that has worked for many. Investopedia has got a whole section about real estate you can check over here. Rich Dad Poor Dads author Robert Kysaky also has a book called guide to real estate investing.
Take away
The steps i have chosen to follow while investing in rental property are :
- Do your research carefully
Think of the location you would like to buy. Why that location? What are the potential advantages and this advantages it has? What are the demographics? How about existing or future infrastructure? Good to consider are the average prices in the area and their trends.
- Find value
Like with any investment ensure you are getting the best possible value out there – right price, right mortgage, right deposit.
- Have your future tenants in mind
Picture a future tenant. Design a property you would like to live in. Make sure that your product (property, furnishing, design) is the best on that market.
- Have unique selling points to your tenants
What is the special thing you would like to offer no one has?
- Calculate – margins, operating costs
Have a financial plan and calculate your margins and operating costs.
- Beware – interest rate fluctuations
Important to have in mind that interest rates are in constant move. This can change your monthly installments. It is generally advised to repay your depth first.
Reference shelf
Robert Kiyosaki – Guide to real estate investment
10 habits of successful real estate investors
10 tips for your first rental property
About the author
Boris Grozev is a seasoned fintech executive. Moreover, he is an entrepreneur by heart. Boris has helped number of businesses. To clarify, he has created and implemented business development and product enhancement strategies. In addition, his advisory work in emerging and frontier markets has resulted in culture and technology change. Above all, it has fostered innovation and lead to tangible results. He also invests in variety of asset classes and shares his experiences from the journey to financial independence. Boris’ leadership abilities, ambition naturally spread to others. He is a fast learner. His stamina, attitude and passion to succeed help to achieve common goals.
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