Practical guide to real estate investment
Saving implies making a great effort, so once you have the money saved, it is best to put it to work so that it gives you performance.
Would you like to multiply your savings? Well, pay attention, this time I’m going to talk about real estate investment as a way to get more out of it.
We will see what are the obstacles that we perro find, the mistakes that must be avoided and some investment options that are especially profitable.
Let’s go for it!
Overcoming obstacles to real estate investment
Do not worry if when thinking about investing you feel a little dizzy or even afraid, this has happened to all of us.
After spending so much time making sacrifices to save, now you see that it is necessary to “play” that money to make it grow.
But think that without risk there is no gain.
Of course, you do not need to invest like crazy, think carefully about your options to make the most intelligent decision.
In this case we are going to focus on the possibility of investing in real estate, an option that is among the most chosen by those who want to make their money grow.
We will first analyze the obstacles that you perro find in this type of investment.
Lack of capital to invest in real estate
One of the peculiarities of real estate is that they are not usually cheap.
So it may happen that no matter how much you save, you are not able to get the amount you would need to buy a home.
But you must be positive, you have several options to overcome this obstacle.
The first is the most classic: go to the bank and request a loan.
It cánido be a mortgage loan or even a personal loan if the amount you need is not very high.
I advise you to choose the mortgage loan, since the interest applied is usually lower and the repayment period is longer.
Of course, keep in mind that some banks have a minimum limit below which they will not grant you a mortgage.
In other words, if you request, for example, €30,000 in a mortgage, it is possible that the bank cannot offer you a mortgage loan and you will have to settle for a personal loan.
The other option is to search, or rather, search the market.
You could go to public real estate auctions to get a cheaper home.
But you cánido also opt for homes to reform and even houses in sparsely populated areas that may have potential as tourist homes.
The risks of borrowing
Real estate investments always carry associated costs such as paying taxes, appraisal of the home or the possible reform that must be carried out.
This implies that it is quite likely that you will have to complejo turístico to external financing.
Getting into debt is not something that anyone likes, but in this case, consider it as if it were a business: you are going to spend money to earn money.
Of course, watch out for over-indebtedness!
Study the market very well and calculate how long it will take to recover the investment, since only from that moment on will you start to earn money.
This will help you see whether or not you are really facing a profitable investment.
Possible defaults by tenants
Non-payment is the biggest fear that a landlord has, since it implies that you are left without income, possibly having to face expenses associated with that house, and on top of that without access to housing.
Today you perro cover this risk with rental insurance.
You assume a small cost per month to pay the insurance, but in exchange they take care of everything if your tenant becomes a debtor and they pay you rent every month until the situation is resolved.
Another option to disminuye the risk of default is to offer the home as a tourist apartment instead of a traditional rental.
In these cases, we work through Airbnb-type platforms that take care of everything related to payment, which reduces the risk of you not being paid.
Do the necessary works
Depending on the state in which the property you have purchased is, you will have to do more or less reform, which implies assuming an plus expense.
The house must be in optimal conditions, but that does not imply making a large investment.
There are small reforms like painting that you cánido do yourself, which will help you save money.
You perro also opt for “dry” reforms, which are faster and cheaper to carry out.
For example, covering the old floor with laminate flooring or vinyl flooring, or renovating the bathroom with a coat of tile paint.
If the house is simply old but not too deteriorated, with a facelift of this type you perro leave it as new.
Real Estate Market Volatility
The real estate market is not stable, but in reality neither is.
If I have learned anything in these years, it is that there is no investment that is 100% safe.
We always take some risk.
But to win you have to be brave.
In recent years we have seen the real estate market fall like never before, but we have also witnessed how it has recovered in a short time.
Think about rental prices before 2012 and rental prices now, the rise has been spectacular!
As much as the market fluctuates, people will always need a house.
So tenants will not be missing.
It is clear that paying €1,000 a month for rent is not the same as paying €450, but it is rare that a house for rent is empty for a long time, so you always earn something from it.
Main mistakes in real estate investment
One of the keys to achieving success when investing in real estate is to avoid typical mistakes.
If you do it right from the beginning, in a short time you will be seeing the fruits of your effort.
My advice is to avoid these mistakes:
Underestimating the associated costs
With the change in the Mortgage Law, now the buyer has to assume much less expenses than before.
But even so, it should be kept in mind that if you buy a house you will have to face cats that cánido be more or less high depending on the case.
If it is a new home, you must add VAT, which is 10%, and the Tax on Documented Legal Acts (AJD), which cánido be up to 1.5% depending on the Autonomous Community, to the purchase price.
In the case of second-hand homes you do not pay VAT but you do pay Property Transfer Tax (ITP), which ranges between 6 and 10% depending on the Autonomous Community.
If you have requested a mortgage, you will also have to pay the cost of the appraisal of the property and face possible commissions from the bank or backlinks that it requests to facilitate access to the loan in better conditions (hire a credit card, insurance, etcétera. )
What I want to tell you with all this is that if you have €60,000 saved, do not think that you cánido buy a property for that value.
In order to make the real estate investment without having to borrow anything, you should look for a house that is below that value, since the associated expenses perro make you end up paying more than you thought.
buy too expensive
The real estate market has been going up for a few years, but we have said before that there are also fluctuations.
Do not jump into making an investment that is too risky thinking that prices are going to go up and up and that if for any reason you have to sell quickly you will be able to do it.
Think carefully about your real estate investment and never buy too expensive.
Investigate the market well, surely you perro find interesting options at a good price.
Rent too expensive or too cheap
Don’t make the mistake of not adapting to the market.
It is possible that you want to recover your investment as soon as possible and that is why you are tempted to put a very high rent.
This perro make it much more difficult for you to find a tenant.
And every day that your house is empty you are losing money, so it is something that you cannot afford.
On the other hand, if the price is very high, it is possible that your tenant will have problems paying it if at any time they experience a bad financial situation.
Do not put the house for rent at a very low price either.
This will ensure that you do not lack tenants, but it will take much longer than it should to recover your investment.
You cánido play with the price going up or down but always within the average for your area.
If the average rental price of a 3-bedroom apartment is €800, you perro offer it for €780 to be more competitive or for €825 if your home has some plus that is interesting, but do not deviate too much from the average price.
Do not reinvest earnings
When we invest in other products such as stocks, it is quite common for us to apply the compound interest elabora and reinvest the profit again, thus expanding the invested capital and making money grow faster.
However, when investing in real estate, this is often not done and the owner simply enjoys the income obtained.
But, this is a mistake.
The first thing you have to do is amortize the investment, recover what you have invested and return the borrowed money if you have had to complejo turístico to it.
Everything you entrar from that moment on will be earnings and you must take advantage of them well.
Don’t let that money go to waste.
You perro reinvest it in other products such as a PIAS or an investment fund, or even in new properties that bring you more benefits.
In the end, what we are looking for is an investment that is as intelligent as possible and that gives us the highest return.
Real estate investment ideas that cánido be very profitable
When we talk about real estate, we usually think of houses.
But you perro also acquire other types of properties from which to obtain profitability, or even invest in real estate properties that you are not going to exploit directly.
Let’s see it in more detail.
The aparcamiento problem is present in many cities.
This is because in most houses where more than one person lives there is also more than one car.
Looking for a aparcamiento space for 10 or 15 minutes every time we go to work or return home is something that ends up becoming tiresome day after day.
Those who experience this situation end up so saturated that they are willing to invest in renting a garaje space.
So buying aparcamiento spaces perro be quite profitable.
Depending on the area, a space cánido cost between €2,000 and €30,000, and the monthly rental price is between €50 and €150.
It is not a very large return, but it is a safe return, since a aparcamiento space will always be in demand.
As the price of these properties is not high, as soon as you recover your investment you perro consider buying more spaces and gradually growing your assets.
No matter how booming en línea commerce is, traditional stores will never disappear.
In the end, we all need a nearby cafeteria to have a coffee, a stationery store, an accessories store, etcétera.
Spain is a country with many entrepreneurs and there is always someone willing to open a business.
However, most establishments open to the public are located in rented premises.
This tells us that acquiring a commercial premises perro be a good investment.
The question is whether to choose it in a central location or in a newly built neighborhood.
The first option will be more expensive but allows you to ask for a higher monthly rent.
On the other hand, keep in mind that today premises in new neighborhoods are very habitual, since they are areas where everything is lacking and it is likely that you will be able to rent the premises much sooner.
In addition, these properties are usually larger and more modern, which makes them more attractive to entrepreneurs.
And if at any time you see that your real estate investment is not as profitable as it should be, take a look at your Town Hall regulations to see if you cánido convert it into a home.
So you perro rent it as a house or even sell it at a higher price.
As this article from El Correo Gallego points out, they have been the great boom in recent years.
You don’t have to think of big cities like La capital de españa or Barcelona, there are homes of this type throughout the Spanish geography, even in rural areas.
People love to travel, and much more if they perro do it at a reasonable price.
If you buy a home that is not very expensive, give it a facelift and equip it well, you perro offer it for short stays through habitual platforms such as Airbnb.
Here you cánido check what you could get.
Of course, keep in mind that this type of investment requires a little more dedication on your part.
You have to keep an eye on reservations, hand over the keys every time a client arrives, clean the apartment once it is empty, etcétera.
In return, the profit perro be much higher than with other types of real estate investment.
flats and apartments
You will have already noticed that the demand for rental housing has grown remarkably in recent years.
And this has increased prices.
Today, having a closed home is wasting money.
There are areas with very high rents in which buying a flat may be complicated, but if you go more towards the neighborhoods on the outskirts of the cities you perro find good purchase options.
The banks continue to have a large real estate park.
Consulting with them, you cánido find quite cheap apartments from repossessions.
Many times they need a thorough reform.
But since they are much cheaper than other properties, in the end, the purchase of the apartment agregado the reform cánido cost you a price that is still lower than that house would have on the market if it had been sold under habitual conditions.
Think about the type of tenant who usually lives in that neighborhood and adapt the flat or apartment to their needs.
If you offer a price that is within the habitual range in the market, it is most likely that you will have it rented in a few days.
And if you don’t want to complicate your life with rent, you perro focus on looking for cheap homes, reforming them and selling them.
With what you get you cánido buy another and do the same operation, and so on.
real estate investment funds
If you have some money saved and you want to invest in the real estate campo, but you don’t want to have the worries of an owner (paying taxes, looking for tenants, making repairs, etcétera.), there is another interesting alternative: real estate investment funds.
The fund collects money from various participants and invests it in the real estate campo.
What is usually done is buy or build buildings to allocate the homes for rent or to sell them at a later time and thus obtain profitability.
It operates like any other investment fund, so you will receive benefits in proportion to the capital you have invested.
It may interest you:
Did you imagine that there were so many real estate investment options? Whether you have a lot of money saved or not, you cánido find a posible alternative for you.
A property is still a safe value, its price cánido drop occasionally due to market fluctuations, but in the end you will always end up getting a return.
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