Real estate equals real wealth, or at least, that is what investors believe. In reality, it depends on the situation. For example, it’s unrealistic to expect a rental property to provide ROI of $180,000 profits for more than a decade. On the other hand, there isn’t any guarantee that you will not lose everything you invest in a matter of months.
Real estate investing is a couple of number of things, including luck. However, being lucky does not imply you cannot do your homework and increase your chances of success in the process. The numbers prove that certain features are more likely to lead to greater revenue or higher turnover.
As at all times, the trick is to find out which local elements require the best resale value, and present them to the client or tenant with a neat bow connected. However, what if there are special features that benefit the entire? It would make life ten times easier. The excellent news is, they exist. The bad news is, they aren’t at all times accessible.
Regardless, it is better to know about them so you can incorporate them into your next project than to neglect and miss out on potential funding. Continue reading to learn more.
Land
It’s tempting just to consider buildings when investing in property. Let’s face it – it’s a money maker. Exterior and interior are two aspects that determine how much money you make, which is why you focus so much on both. Everything else is under the radar, including the ground.
First, you should not assume what you see is covered by the agreement. There are many instances where a garden, for example, or a driveway, are separate entities. Thus, it isn’t yours when you sign on the dotted line. Double-checking the fine print and referencing the blueprints should limit damage.
Second, real estate investors struggle to understand the potential of open spaces. Land for sale are at a premium right now as the world’s population is at its peak, and more and more people are in the market for housing. With land, you can do two things – build and sell the property for extra profit, or strike a deal with a contractor.
Either way, the ball is in your court, meaning you have the potential to take investing to the next level. However, you must own the land.
Building Permit
Building permits are directly related to the resale value of land. Without it, you cannot build, period. Therefore, your bargaining power and earning potential is much lower. Still, a professional contractor would not mind too much since they’ve a contract. In short, they will not buy unless they know they can make money.
So why are permissions important? This comes right down to the proven fact that you haven’t got to build a new property to secure a bigger piece of the pie. An immediate renovation is sufficient to add thousands of dollars to your home’s appraisal. Suddenly, through renewal, you have positive equity which increases your ROI (figuratively!).
There is a catch – you can’t build without authorization. Some projects do not require a permit, such as a project that extends at a lower level and moves in a straight line, but many do, and you can Learn more here. The thing to remember is that once permission has been granted, there’s nothing to worry about.
Permits are barely revoked, which means you can invest with future renovations in mind. Still, you must watch out that permissions aren’t created equal.
Location
Yes, location is essential for investors. With the help of an incredible transport network, low crime rate and high-quality schools nearby, you’ll be capable to sell or attract tenants. While this is true, there’s more to the similarities than meets the eye. Often, it is the big and small things that fly under the radar and elude real estate investors.
For example, do you consider the neighborhood’s vacancy rate when trying to find potential rental properties? Most people do not, and as a result, must spend cash when low demand leads to a break in tenants. High rental rates are essential because they not only let you earn more, but also highlight the popularity of the area.
Another location feature that you should not ignore is the climate. Are you wondering why Florida and California are on the owner’s wish list, or why island life cause jealousy? It’s not that the property is cheaper or better built, not at all. This is the weather.
When people picture their dream home in their head, they picture a balcony overlooking the ocean at sunset. By playing with this idea, you’ll increase your chances of selling or renting your property to applicants who want the location as much as they want the building itself.
Tax
Two things never change – death and taxes. The latter should at all times be small, for you and anyone else interested in buying or renting your property. The very first thing to look at is how much you’ll pay in property taxes as high rates will eat away at your profits. The average is about 3%, but varies between states.
Also, not to be unreasonable, but you should consider inheritance taxes or capital gains levies. The latter is the profit you make from anything above a certain threshold. Obviously, taxes also affect buyers, because they do not want to take your responsibility.
On the other hand, tenants are worried about different fees. For example, there may be high taxes to local governments for general maintenance, such as landfill disposal and road repair. The monthly fee can be enough to encourage them to look elsewhere, so it is a good idea to consider the price of living in the home whether you are planning to move or not. The excellent news is, the numbers are decided at the local level. Therefore, the location determines the existing price good and bad state for property taxes.
If your investment property contains any of the above, you can convert real estate into real money.
