Introduction:

In our country, investment in real estate is characterized by being attractive, since not only can it generate monthly income and capital appreciation, but it also has less volatility in its prices. But it is not enough to know that a property is an efficient investment, it is necessary to know the characteristics that this type of asset must have to increase the probability that it is a good investment. The investor must not act on impulse, he must have a clear investment strategy.

The aspects to consider are the location and size of the property. It is important that the property is in areas with high demand for both housing and tourism, that it is close to business and entertainment centers, and that it is preferably small in size, but with an efficient distribution of its areas. A determining factor when choosing the location of the property is the mass transportation system.

Another factor that must be considered in order not to make a mistake is to carry out an adequate inspection of the property, if possible, with a construction specialist, bricklayer, master builder, etc., who can provide an opinion regarding the state of the property. Likewise, like any investment, it is necessary to investigate the maintenance costs of the property, the payment of basic services, taxes, and other related expenses.

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The legal factor is a fundamental aspect to consider, considering the taxes that will have to be paid, the registration procedures and the sanitation of the property. In this aspect, the investor must evaluate if it is convenient to access this investment in a personal capacity or through a legal vehicle or a real estate investment fund. Likewise, keep a responsible and detailed accounting of the income and expenses resulting from the investment.

Finally, it is necessary to know in advance all the relevant legal regulations of the area where the property in which you want to invest is located. To know more about real estate

TYPES OF REAL ESTATE INVESTMENT

INVESTMENT-TYPES

Investing in real estate is one of the oldest activities known to mankind and therefore one of the most developed and complex. However, and despite its vital importance, not all people have the basic and necessary knowledge to function competently in the real estate market and thus procure a property that ensures personal development and satisfaction, as well as generating material benefits.

When we talk about a real estate investment, we are necessarily referring to the generation of profitability, which implies the relationship between the benefits provided by a certain operation and the investment or effort that has been made, which is usually expressed in percentages.

In the world of real estate investments, there are three classes of businesses that are clear, each one has its own rules, conditions, and different processes. The first type of investment is the capital gain type; the second, is by cash flow and the third is real estate development. In that sense, the central idea of ​​each of these ways of obtaining financial return is as follows:

CAPITAL GAIN: BUY TO SELL

CASH FLOW: BUY TO RENT

REAL ESTATE DEVELOPMENT: GENERATE VALUE

Now, we will analyze each of them:

CAPITAL GAIN.- It means that from the moment we acquire a real estate asset for the investment we have to buy below the market price, so when we sell it we will always win, even if the country’s economy is unstable we will win and not lose.

On the other hand, we must also take into account that the value of a property increases as time goes by. Some properties increase their value faster and in greater volume than other properties. The key to being a successful investor is precisely understanding and knowing when to buy a property.

For example, if it is a property located adjacent to a place where a commercial or financial center will be developed, the property will increase its value for the simple fact of being adjacent to the project. In this way we see how a property increases its value, that is, generates surplus value without the necessary intervention of the owner. Another clear example would be the property located in an area with urban parameters favorable to the construction of large projects.

Do not forget THE REAL ESTATE BUSINESS is found in buying NOT in selling.

CASH FLOW. – This means that the property must generate income obtained from the rental of the property. And even more so, if it were a Free Cash Flow, which represents the cash available once all the investments in fixed assets and in the working capital necessary to carry out the necessary operations to develop a real estate project have been made; this must be sufficient to cover the cost of maintenance and others required by the administration of the property and still produce profitability for the investor.

Example:

  • Monthly rent: U$ 1000
  • Maintenance expenses, bank fee, taxes and other U$ 500
  • Free cash flow: $500

When we talk about CASH FLOW we are talking about obtaining a good income, this means that we can live on our income from the rental of our properties.

REAL ESTATE DEVELOPMENT implies knowledge of different disciplines, such as administration, architecture, law, finance, and market research, among others.

This type of investment requires a detailed analysis of the economic potential of the asset. The key is to maximize the speed and volume of sales. This requires significant investments in marketing, positioning, and brand management.

All three types of investments are highly profitable. Knowing how to choose when a certain type of investment corresponds is what will determine the success of your real estate investment.