Investors traditionally consider property markets as a safe haven. A real estate object cannot disappear and even if the price goes down, it’ll rise again sooner or later. However, you can lose money even when investing in property without paying due attention to objects on the market.
How to find investment properties and avoid mistakes?
First of all, you need to decide where you want to buy property. Not all people are lucky to live in a booming real estate market so they have to look for options in other cities or even abroad.
- Evaluating economic indicators
The attractiveness of a real estate market is determined by the region’s investment potential which depends on its GDP growth rate, foreign direct investment volumes, economic structure, political stability, its factors of production, the volume and dynamics of customers demand, unemployment rate, etc.
- Evaluating migration and tourism dynamics
Large immigration may be a good sign meaning the city’s population is quickly growing and stimulating high demand for residential units and commercial objects (due to the rise of economic activity).
If you choose such a specific type of property as hotels or serviced apartments, look for places with high tourist inflow and developed hospitality sector (Montenegro, the UAE, Turkey, Thailand, Cyprus, etc.)
- Evaluating legislation
Knowing how to find investment properties isn’t enough. In case of foreign property investment, one must also check what advantages and drawbacks the given destination offers in terms of legislation. Do foreigners have the right to purchase property here? Are there any specific terms? Can you get a loan in a local bank and at what interest rate? What taxes are you going to pay? Does the given destination offer a foreign investment program? Seek for countries with law protecting foreign investors.
- Evaluating long-term development
Real estate investment is designed for long periods of time so one should take into consideration the prospects of the given region, city or area. Search for destinations with plans to build schools, hospitals, malls, roads, etc. After such changes, the attractiveness of local real estate will substantially rise.
- Evaluate the property market
And of course one must analyze the real estate market they’re interested in. What you want to know is the average annual growth rate of property prices and mid-term prognosis both for the market in general and for its segments. Be careful though. The growth of more than 15-20% a year may indicate that there’s a speculative bubble on the market. Also consider such factors as sales volume, rental rate and construction volume.
How do you find this information?
- Look for free outlooks and analyses from large real estate companies and consultancies. Visit their websites: com or knightfrank.com. These are international firms working with property markets all over the world.
- Try visiting similar websites created by government structures. While prognoses and interpretations may be vague and very subjective, sales volumes and other statistical data are precise.
- Look for similar data concerning other economic segments – population and migration, overall economic tendencies, employment market, construction sector, etc.
- Remember that accurate data are usually published with a certain delay – about two or three months.
These tips will help you find investment properties with high potential.