Factors to increase the profitability of real estate investment
It is definitely still safe today to acquire a property due to its profitability, which added to some strategies can further ensure the return on investment.
Among the factors that serve to increase the profitability of the real estate investment are the connectivity and services of the area, urban development plans, seasonal rentals and real estate reforms, among other aspects that we explain below.
How to increase the return on investment
The elements you should consider before making an investment or if you have already made an investment and are evaluating the potential return on real estate investment are broken down as follows:
- The location of the land
The first thing to do is to find out which areas in the area where you want to invest have a capital gain, and to ask if the demand from buyers and tenants is high and if the trend is upwards.
If it is a commercial area, you should assess the safety of the place, if there are many consumers in the area and if there are other businesses nearby. If possible, look for a land price report as it will indicate what the demand trend is.
- Connectivity and services in the area
In this case check if the location is easily accessible as well as if there are basic services, hospitals, schools, markets, how long it takes to go to other commercial areas and where the main population centres are located.
- Urban development plans
It is important to know in advance if any urban development plans are planned. This is to find out if there will be alternative roads, public transport stops, any educational or business centres.
Generally, real estate companies in the area have market studies that show what the estimated return on investment will be. They also calculate what type of business can be opened and what other projects are planned for the area.
In addition to knowing about the factors that can help to make the real estate investment more profitable, it is also useful to know which points should be emphasised after the investment has been made, for example:
- Long-term rental
If the rental is long term, a cash flow will be obtained through a fixed monthly income, that is to say, the owner will receive money on a constant basis.
The difficulty with this type of investment is that the return on investment will be longer. However, once a profit starts to be made, it is possible that the income will be for life and will increase if the capital gain allows it.
- Property maintenance
The property needs to be maintained on an ongoing basis. In this way, you can avoid further damage that could lead to higher expenses, risk its value or limit the possibility of renting it at a better price, resulting in higher profits.
- Seasonal rentals
When it comes to secondary residences, owners do not rent for long periods of time, but for special seasons. For example, if the flat is on the beach, they rent the place for a few days for holidays.
This type of rental generates higher rents and therefore, the return on investment will be seen in a shorter period of time. It is recommended to look for expert real estate advisors who can provide the necessary guidance for this type of rental.
Refurbishment will increase the value of the property. And it will be more likely to be sold or rented at a higher price. Also, the more you fix it up, the more attractive it will be to more people and the more people will be interested in renting or buying the property.