Factors needed for Real Estate Investment
5 minute read
February 15, 2021


Real Estate Investment

Real estate is an ideal choice when it comes to investing hard-earned money. As a matter of fact, it will be immensely beneficial to invest in real estate. As long as you know what and how you are doing, it can be useful. Many people make assumptions that investing in real estate will instantly bring an automatic profit. But, this is not possible all the time. At the same time, you will also lose a lot of amount and time if you make bad real estate investment decisions. So for this purpose, do a lot of your research. Do consider the important factors needed for real estate investment in any given property.

Some of the essential factors that we will consider while deciding on real estate investment.

Location of property

“Location, location, and location” is always the king. This is the most consistent and important factor for making a profit in real estate investment. Notably, proximity to facilities, greenery, beautiful views, and the area’s status factor in residential property market values. In commercial property valuations, proximity to marketplaces, transportation hubs, roadways, and tax-exempt regions play an essential role. The middle to the longer perspective of how the area is to evolve over the investment period is vital when considering the property’s location.

Property Valuation

Land valuation is necessary for real estate investment for purchasing finance, listing rates, investment appraisal, insurance, and taxes, all of which depend on real estate valuation.

Real estate valuation methods are as follows.

  • Approach to income

Based on future cash inflows appropriate for rents

  • Cost approach

Property and building costs, except depreciation required for new construction

  • Sales comparative approach

The most popular and acceptable for both new and old properties, recent comparable sales of properties with identical characteristics.

Expected Cash Flows and Profit Opportunities

Cash flow contributes to the amount of money left after real estate investments. For a reasonable interest rate over an investment property, positive cash flow is key.

Ways of profit and expenditure are as follows:

  • Cash flow expected from rents
  • Cost-benefit analysis of mortgaged loans vs value appreciation
  • An expected rise in primary value due to long-term cost appreciation.
  • Advantages of depreciation
  • Cost-benefit analysis of renovation

Always careful with Leverage

Not to mention, loans are outstanding, but they will also come at a great price. To get utility now, you contribute your potential profits to the interest rate spread for several years. Above all, it’s essential to understand how to manage those loans to minimize potential debt levels. In cases of unfavorable market conditions, even real estate experts are threatened by over-leverage and liquidity challenges. These heavy debt requirements will break up real estate deals.

Consider the following, based on the existing and expected future earnings:

  • Decide on the type of mortgage that best fits your situation. Note that each type of mortgage has its risk profile, and you need to study each carefully.
  • Be aware of all the terms, conditions, and other fees related to the mortgage lender.
  • Research about lower interest rates and good terms.

New Construction vs Existing Property

New construction generally includes competitive costs, customization opportunities, and modern facilities. Nevertheless, delays, increased prices, and the unknowns of a newly built neighborhood include complications. Generally speaking, existing properties provide ease, quick connectivity, improvements that the people implement, and, in many cases, lower prices.

In general, there are a few essential things to look for when choosing between new construction or an existing house:

  • Reviewing all the property deeds, surveys reports, and appraisal reports for existing properties.
  • Evaluate past ventures and review the credibility of the construction firm for new investments.
  • Consideration of the monthly maintenance costs, outstanding dues, and taxes.
  • Costs like the upper ones will severely affect your cash flow.
  • Quality products if they will expect to use in the purchase.

Indirect Investments in the Real Estate sector

Although, physical land management over a long-term horizon is not for all. Alternatives are available that allow you indirectly to invest in the real estate market.

Analyze other methods of investing in real estate:

  • Real estate investment trusts
  • Real estate sector-focused mutual funds
  • Mortgage bonds
  • Real estate company stocks
  • Mortgage-backed securities

Credit Score

Definitely, the credit score influences your ability to apply for a mortgage and affects the conditions accepted by your lender. Eventually, you will get good offers if you have a high credit score. It will add to huge potential savings.

Focus on raising your credit score if required:

  • Paying down all the debt.
  • Set up automated transactions or alerts to pay bills on time.
  • Do not close expired credit cards until they pay monthly payments.
  • The target for credit use of no more than 30 percent.
  • Reviewing credit reports.
  • Limit new credit requests.
  • Hard type of inquiries.
  • Dispute inaccuracies.

Real Estate Market

Of course, just like other forms of investing, buying low and selling high is excellent. Besides, there are changes in real estate prices, and it allows us to be cautious of trends.

Always stay up-to-date with changing trends and statistics:

  • Home prices
  • Home sales
  • New construction
  • Property investments
  • Mortgage interest rates
  • Foreclosures of mortgages


Real estate will help you to expand your portfolio. In particular, real estate has a limited association with other large asset groups. On the contrary, real estate always rises, whereas stocks are down. Additionally, real estate investment will offer constant cash flow, huge appreciation, tax benefits, and risk-adjusted competitive returns make it a smart investment. Much like any investment, it’s important to consider those aspects when you choose physical land or REITs before investing in real estate. For expert opinion and guidance, contact Aceland Mortgage.

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