A DUMMIES GUIDE TO REAL ESTATE INVESTMENT
One of the most common ways to become rich in Sri Lanka is to invest in real estate if it is done, as it should be. Investing in real estate is both high-risk as well as highly rewarding if the art of the deal can be mastered properly. Therefore, if you are also someone who is thinking about investing in the country’s property market, yet, is not confident that you have the required knowledge, then read below for a brief guide on what to expect, when investing in real estate.
- What is considered as real estate investment?
Real estate investing can typically be defined as the buying, selling, leasing or managing of properties, with the purpose of attaining a profit in the long term.
- Frequent methods of real estate investment
Some of the most common methods traditionally seen in real estate investment are mentioned below.
- Offering rental properties
The basic notion of a rental property is to generate a profit through the cash flow that is received as the rent, as well as through the appreciation of that property, which helps to increase the rent value through time.
- Buying and selling properties
The fundamental concept behind buying and selling of properties is that you as a developer will acquire a property, improve its condition to increase its monetary value and will sell it to a buyer while keeping a healthy profit margin.
- Wholesale of properties
Experienced real estate investors conduct the wholesale of properties where they act as an intermediary, acquiring a property under a contract and immediately selling it to another buyer. They use the money to pay the initial seller while keeping a profit in the process.
- Common property types in real estate investment
The main property categories and some of their subcategories are mentioned below.
- Residential houses: These include single-family houses, multi-family houses, villa/bungalows and annexes.
- Apartment properties: Includes apartments, condominiums, penthouses and studio properties.
- Commercial properties: These include commercial buildings, office spaces, retail spaces, showrooms, industrial/warehouses and hotel/leisure properties.
- Land properties: Includes lot/land, land with building(s) and agricultural land.
- Why location is important in real estate
One of the fundamental factors that affect the value of a property is its location. Usually, properties located in or near an urban area has a much higher value compared to properties located in a rural district.
- The condition of the property affects its overall value
Without a doubt, the condition of a property affects its monetary value. For an investor, obtaining a property in a rent ready condition is the obvious choice. Buying a fixer-upper can be cheap. However, preparing it in a presentable condition can cost time and money.
- How much capital is needed to invest in real estate?
The overall capital required for real estate investment depends on a few factors. These include the nature of the investment, the location of your investment as well as the specifications of the credits you have acquired for the investment.
- How to obtain money to invest in properties
The most popular method to acquire money for real estate investment is to obtain real estate loans through specialised financial institutes. The investor, however, will have to meet the terms and conditions specified by these institutions to qualify for such loans.
- The importance of negotiation in real estate
Any new venture capitalist who is thinking about investing in real estate in the long term should have excellent negotiation skills. For example, when looking to buy a new property, the investor should ask numerous questions about the property and opt to offer a lower starting price to strike a better deal.
- How to protect yourself when investing in real estate
Real estate investors should be prepared for any pitfalls, as the monetary cost of such a scenario can be extremely high. Typically, the most common way to protect your assets is to safeguard them using a real estate insurance cover, which can help you to recover the value of your investment if things don’t go as planned.