Key considerations to know in real estate investing

Properties have been luring in investors for their various pros. But before stepping in and realizing the edge of real estate investing, some factors must be considered.

Investors might each have their own objectives through their investments; and real estate is widely seen to meet several of them. Among these is providing an opportunity for investors looking to diversify beyond the stock market or those wanting to gain more control of their investments. And for investors who merely seek to earn from passive income, returns from real estate investments could be generated as such.

Whatever goals one has in mind as an investor, venturing into property investing must involve exploring the real estate industry, the market, and one’s finances.

There are different ways for investors to embark on the real estate sector. Each of them is expected to vary in terms of the amount to put in, potential risks and returns, as well as the management needed, all of which are considerations that investors must be aware of to know which is best for them to add to their investments.

Perhaps one of the most known means to profit from real estate is through investing in properties to rent out. Ideally, such kind of real estate investing could generate steady cash flow, whether an investor leases their property to tenants for a long term that extends years or for a short term like overnight staycations.

But, while rental properties could be rewarding, investors must understand that this real estate investment demands continuous effort and expenses. Among the responsibilities that could cost investors in managing their properties are maintenance and repairs. Rentals could thus be challenging especially if investors manage several properties for lease in their portfolio.

Another way of getting investment returns from procuring a property is through flipping. This meant purchasing a property, renovating it, and putting it up for sale in the market, which then could generate earnings in the short term. However, this investment could be complex, particularly because of the costs it would require for the renovation and its processes.

Apart from rentals and flipping properties, some also view their own homes as an investment. As the owners, investors can earn from their homes someday when they decide to sell them. Investing in one’s home could build its value in the long term.

Such ways to invest in real estate entail managing the properties. Nevertheless, for investors who prefer not to always oversee their properties but still want to partake in real estate investing, they could look into real estate investment trusts (REITs). Investing in REITs involves purchasing a share of a company that owns income-producing real estate assets. When such companies get revenues from their properties, they return the dividends to their investors.

These advantages and risks that come with a particular way of investing in real estate must be looked into by investors to decide which they would go for. But whatever ways one chooses to invest in the real estate sector, investors would need to have their finances ready to pay the costs of such investments.

As mentioned, spending for a real estate investment does not stop at purchasing the property. Especially if such properties would be leveraged for rent or would undergo flipping, investors would have to make expenses for their investments to earn.

In addition, investors must be acquainted and updated about the real estate market to leverage possible opportunities and somehow have expectations. Among the factors they should look at are the property’s location, tenants’ housing preferences, and even the economic conditions.

For instance, looking at the inflation situation in the Philippines during the past months, Colliers held that investors must continuously monitor deviations in inflation and interest rates, and their effect on mortgage rates.

“Colliers encourages investors to proactively monitor interest and mortgage rates, particularly as these strongly influence the viability of condominium as a residential investment,” the professionals services and investment management firm said in its report from July.

The location also matters in real estate investing, such as if a property is surrounded by many conveniences.

In relation to location, Colliers stated in the same report that vertical units within integrated communities and close to public infrastructure developments possess “great capital appreciation potential,” which therefore are among key features that investors should consider in investing in condominium units. This as the firm observed that the investor market in Metro Manila still depends on the potential capital appreciation of condominium units.

Investors should also watch out for the trends and preferences of home seekers. These preferences could deal with the amenities such as outdoor spaces; the location or its proximity to essential establishments; or features that enable smart or sustainable home living. But what tenants look out for in a home constantly shifts, so property investors should stay updated on the market. — Chelsey Keith P. Ignacio