5 Lessons From The Real Estate Market Before You Start Investing

Home you live in is the best investment: If you are thinking of making an investment in property, make sure it is the home that you would live in if you had to. The utility, appreciation and maintenance of this kind of property makes it the best in the property market, given the options like rentals, land plots and commercial real estate. If you are making multiple bets, always make home investment your first.  

Simpler the deal, easier the financing: If a real estate deal is simple and straightforward and does not have legacy payoffs, it becomes the easiest to get financed. Many people choose complex structures like leveraging other property and borrowing against instruments whose value might waver, like stocks. This makes the deal complicated and value fluctuate. Bankers find it tough to lend to such projects. Preferably, sell the shares and other such investments and convert them into upfront payments instead of borrowing against them.

History does not repeat as often: Property values of this land might have gone up 200% in the last five years. That is a very attractive factor. But, it is also an indication that it might have become saturated. If the prices have gone up exponentially, it is already a very expensive place and might not appreciate as much in future. So, do not add historic appreciation values while making bets on appreciation of property. Jerky growth might be a one-time affair for many properties and may die down soon after.   

Smaller housing units are a hit: When choosing to buy a rental property, always go for smaller units like single-family units, studio apartments or one-bedroom apartments. If you have money to buy a larger property, buy two of such smaller properties instead. A big home might sound grand to own but if it is not for personal residential purposes, it might end up becoming a white elephant. Smaller homes are easy to rent out, have a better demand in the rental market and are much sought-after in metro cities. Bigger apartments are tougher to find tenants for and attract higher amount of tax. Going by the current under-construction properties, it also looks like new single-bedroom homes are going to be fewer in the future. Buying them now would be a good idea.

Rental properties are tough to deal with: It sounds very good to buy a house and rent it to make money. But, unlike properties where you yourself reside, rental homes can be very tough to deal with. Some of the troubles are regular maintenance, wavering demand in the rental markets, and also the risk of damage to the property. Commercial renting is a much tougher game as it involves a lot of legal work.