Is there a right time to buy properties in the real estate sector? Experts keep on trying to convince you through various economic policies and market trends that there is a specific time when you should invest your resources in the real estate.
However, it all depends on your situation and when you feel that it is the right time for you to spend your hard-earned money. Nevertheless, here are some essential factors that you should think about when investing in real estate properties.
1. Property Taxes
You should know that property taxes is one of the factors that is leading to the high cost of properties in the real estate sector. However, taxes vary on state, which means that you may be able to purchase a rental property with low taxes. You should have a clear understanding of property taxes before making the purchase decision as taxes will affect the property’s cashflow.
2. Income Varies
If you are new to this industry, you might have a perception that you will be getting uninterrupted flow of income, especially when you buy rental properties. Unfortunately, this isn’t the case. Sometimes tenants unexpectedly move out or fail to pay their rent, and it may take some time before the apartment can be occupied.
During this duration, when your house is not occupied, you should be prepared to handle recurrent expenses such as mortgage, insurance, and bills, which will substantially reduce your income.
3. Rural vs. City Properties
There is a perception that city properties fetch a massive amount of income due to the higher population and higher demand. However, this may not be true. You need to conduct thorough research before finally making the purchase decision. Sometimes properties in the city are very expensive and come with high taxes. On the other hand, rental properties in rural areas have low occupancy levels, which means that your income flow might be irregular.
4. Buying New vs. Old Property
The market is dominated by both new and old rental properties. There are pros and cons of each property that you will consider. However, you should buy new properties because they have a modern architectural design, which means that they will attract tenants. Some of the tenants might be willing to pay a premium, which will increase the flow of income.
However, don’t forget that new properties attract a high commission during transfer.
5. Trends in Real Estate
You should understand that the real estate sector is one of the industries that is incorporating technology at a higher rate. For example, people prefer energy efficient houses which are fitted with solar panels.
Environmental conservation is also an essential factor that you need to put into consideration. You need to use materials or buy a house that has been constructed with ‘green’ construction materials.
6. Exit Strategy
Do you have an exit strategy? You don’t want to own the property for the rest of your life. Probably you will need to dispose of the asset and get your money back after getting profit for a particular period. You should work on an exit strategy before you have entered into the market so that you can be prepared.
These are some of the fundamental factors that you should think and analyze before entering the property market. They will guide you to acquire the property, make sure that your property generates revenue, and also dispose of your property.