Investing in real estate is one of the best ways to protect your money and assets. We will give you some recommendations to help you identify a good investment opportunity.
There are several ways to make money with real estate. However, you should consider the profitability of a property before investing in it.
While almost all real estate investments are good, some factors will help you identify an excellent real estate investment opportunity that will allow you to achieve a shorter-term return on investment.
How do you know if a real estate investment opportunity is profitable?
Consider operating and maintenance costs
When investing in real estate to earn a living from your income, it is important to consider the cost of renting a home and keeping it in the best possible condition. These expenses may include paying taxes such as income and property taxes; making repairs; and covering monthly expenses for basic supplies such as electricity, water, and gas.
When this is taken into account, net operating income, known as NOI, can be calculated. This indicator helps us determine the real earnings of the property.
To calculate this number, you must subtract all operating costs from the amount of gross income you earn from the property. For example, if you rent your home at 15,000 pesos per month and spend 5,000 pesos per month on operating costs, the NOI is 10,000 pesos ($15,000 – 5,000 = $10,000).
Conduct market research
It is recommended to do a thorough study of the market trends prevailing in the location where you plan to invest.
That way, you will know which option is best for you to help you achieve your goals. As an example, it has become popular to place a property on rental platforms and this phenomenon is attributed to the fact that many of those who choose to invest in real estate consider it a more profitable business as a long-term income.
Conduct a real estate appraisal of the property
The best way to determine if you are investing the right amount in a property is to perform a property appraisal before you buy it. This appraisal should take into account all the characteristics of the property, such as location, number of rooms, equipment, quality of finishes, access to services, etc.
In this way, you can establish a good rental price after the purchase. Not only can you calculate the NOI and your capitalization rate more accurately to decide if the purchase will bring you the return on investment you desire.
Consider these recommendations to help you identify the best real estate investment opportunity and ensure the stability of your wealth.
