Checklist for Real Estate Investments

Are you considering buying a real estate as a form of investment? You should be reminded that as an investment, there can risks and threats to real estate endeavors. While it is true that some real estate investors have really hit it high, there are also many of those who incurred losses because of inappropriate and unlikely property investments.

Real estate investments are surely providing steady flow of income and returns, only if they are appropriate, strategic and really sound. As a new investor, how could you guard yourself against unlikely real estate investments? It would be helpful if you would take a look at this simple checklist for real estate investments. If you would buy an investment property, better check out the following factors.

Location – Market valuation varies depending on the venue of the property. Of course, valuation of real estate in expensive markets is higher compared to similar properties located in cheaper and less lucrative markets. Globally, Moscow, London and Seoul are among the most expensive cities where valuations of real estates are at their highest. Properties in New York, California, Paris and Rome, among some, have always been on top of their ranges.

Tenant credit risk – You should know that the valuation of real estate can very much depend on the expected rental income of the property. If the real estate is not likely to generate significant rental income, then its valuation would surely decline.

Physical characteristics – When buying a property, check out the utility and type of building as these should affect valuation. Of course, condominiums are expensive compared to apartments because the formers are of course more secured, more developed and are provided with better amenities.

Tax implications – Real estate valuation is directly affected by tax implications. Take note that properties are imposed with stamp duties and property taxes, on top of the income tax, which could be computed from the capital gains and rental income.

Higher investment costs – Always remember that real estate investments are practically higher and more expensive than almost all other types of investments. For example, you can easily buy and own stocks. By just investing a few hundred or thousand dollars, you can already build up your own stock portfolio. That is not the case about real estate assets. Not too many people are able to invest in properties simply because they do not have appropriate resources to do so.

Legal issues – Most real estate investments are not as secured as stock investments. Stock exchanges secure and guarantee legitimacy and safety of investments. In real estate, such regulating body is not present, although a real estate regulator is exiting to rule about real estate practices and at times, prices.

Liquidity – Real estate assets are usually not easily and rapidly liquidated. Transactions cannot be completed overnight or within hours. Market conditions would have to be considered as they would influence and regulate the length and duration of the real estate transaction.