10 Tips for Investing in the US real estate market
We aggregated a selection of points to consider when investing in real estate. what you should do and better yet what you should refrain from doing…
The substance of investment – As Investors, most of us have no intentions of knowing the property, visit it, periodically check it, or personally use it. Essentially, we invest in a “tree” in order to enjoy its “fruits” and put our trust in experienced people to manage our investment for us, very much like managing a portfolio of securities. so while the subject property is important to understand, its real identity is not critical, as long as the business plan we invest in makes sense. In other words, we invest in people so the first question we need to ask ourselves is whether we are willing to invest in or with those people.
Identify the Role of the Company carrying out the investment – Is the company a marketing, a brokerage, a management or an investment company? Some companies just sell properties and transfer the management to other firms, some walk the investors throughout the investment, others invest their funds together with other investors, etc. It is important to identify the interests of the investment company so that there is no conflict of interest throughout the life of the investment.
What is the Interest? Does the investment company get all compensation right at the outset or does it get compensated overtime or gets a portion at the end? This point is important in evaluating the interest of the company to maximize all efforts in getting you ultimate results when negotiating a deal on your behalf. For example, compensation can be structured throughout the lifetime of the investment or if the company is an investor itself then this strengthen its interest for best results and creates identity of interests.
Information and Transparency – Are we getting regular updates about the project? is the information readily available to us? Does the company proactively provide updates? and when approached is the company’s response satisfactory and done in a timely manner?
Awareness – When investing in real estate we expect a higher return than we get at the bank. Every investment carries a risk that comes with the opportunity it presents. Risk in itself is nothing to be afraid of as long as we know what we’re getting into and are aware of the risk and opportunity factors.
Guaranteed return?! In recent years we see more and more guaranteed returns promises in various fields yet history had thought us that in many cases inappropriate and even unlawful activities are involved. This does not mean that every guaranteed return is unreal, yet we need to ask ourselves what is the source for the guarantee? is it covered or backed up by anything? in other words, we need to ask ourselves whether we would have offered the same in a similar situation.
Ask questions before investing – Get the answers to questions you have, gather the information, understand what you’re investing in, evaluate who you’re dealing with, their expertise, trustworthiness, etc.
Take a decision – Once you evaluated your wish to invest, decide!!! yay or nay? There is no point in investing and then worry and be uneasy throughout the investment period. If you decided to invest after considering the information gathered, then go with your feeling and don’t let it occupy your mind to much, it’s not worth losing sleep over it.
Investment period – We need to decide if the prospective investment period suits our needs. There are different terms of investments, for example long term investments which require long term commitment and may also be firm and take time to realize and on the other hand flexible investments with short turnaround and shorter commitment period. Awareness of the type and term of investment contributes to understand its nature whether it meets our expectations.
Investment structure – There are many ways to invest in properties, the investment structure and method can influence the term, flexibility, risk and opportunity and as such we should evaluate the compatibility to our needs.
Contact us today! The investment process is composed of several stages, where the first steps can take several weeks. Therefore we recommend contacting us as soon as possible in order to be ready for investing when an identified project is due to begin.