A beginner's guide to real estate investing

Your time is the most valuable asset you have. This is one of the many reasons why real estate investing is so popular among shrewd property investors: once you find the right conditions surrounding a viable option, your purchase's value could easily skyrocket over the coming years. Here are a few factors to consider when buying an investment for the first time.

Hamburg - buying an investment property

Before you invest

Before you begin even looking at properties, you need to turn your potential investment into a business venture, which means not listing it under your own name. This is for very simple legal reasons: if anything were to go wrong, you yourself as an individual need to be considered as a separate entity from your business so you can therefore protect your finances and your credit rating. Speak to a lawyer about setting up a Limited Liability Company or a Limited Partnership. Taking this step and opting for business insurance will help protect you from any costly legal processes.

What can you invest in?

You can roughly split the world of real estate investing into two types: commercial and residential. Residential real estate investment is where you either buy property to renovate or wait for its value to appreciate, or you can become a landlord. For the latter, you can either get involved as the first point of call for your tenants, or you can employ an agency or a manager to maintain the tenancy for you.

On the other hand, commercial real estate might be a row of shops or a mall, which you let out to retailers. It could also be a warehouse that you rent to a company for distribution, or just a storage unit – the size of your investment is up to you.

What do I need to know about the area?

The location you choose to invest in will affect the type of tenant you attract and how often your property is vacant. Look for an area with a low crime rate and where residents often remain in place for the long term. Areas with high-achieving schools are not only attractive to a certain demographic of tenant, but they also tend to yield higher rents. Amenities nearby also help to boost prices thanks to their ability to drive up local demand and maintain a lively market.

Finally, do thorough research on the state of the local market and taxation rates as a wise property investor. Even within countries, property taxation is not always fixed – for example, they vary significantly from state to state in the US. The number of vacant properties and listings provides an insight into the state of the local market. If there's an unusually high number, it’s worth checking if this is a seasonal issue or whether the local market has slowed over an extended period of time. If so, it's time to take your investment elsewhere.

There are plenty of tips on real estate investing, as well as how to make a success of your investment post-purchase on the Engel & Völkers website. One thing is clear, buying an investment property remains a sound and profitable choice for those willing to do the necessary research.

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