Hello, dear readers of the financial magazine “site”! Today we will talk about investing in real estate.
From this publication you will learn:
- What are the advantages and disadvantages of this type of investment;
- Various real estate investment options;
- Features of investments in construction;
- How to start investing with a small amount of available funds.
In addition, at the end of the article you will find answers to frequently asked questions.
The article will appeal to and be useful both to those who are just looking for ways to invest their own funds, and to experienced investors. Don't waste time, start reading. And perhaps in the near future you will take the first steps towards successful investment in real estate.
What are the main pros (+) and cons (-) of investing in real estate, which real estate is better to invest your money in, what are the ways to make a profit from this type of investment - read more about this and more
1. Pros and cons of investing in real estate - main advantages and disadvantages 📑
Every reasonable person thinks about profitable investments. It is important that investments protect money from harmful influences inflation. At the same time, it is desirable that the invested funds work and generate additional income.
Investment instruments used over a long period of time will help achieve the goals outlined above. It is important that they have minimal risk and are very promising. That's exactly what they are real estate investment .
The need for housing arose many years ago and continues to this day. It will not go anywhere in the future. Therefore real estate Always will be in demand, which means it is an excellent investment tool.
Moreover, such investments represent a completely acceptable option for doing business. To do this, it is not at all necessary to have huge sums of money. You can still invest money in real estate at the initial stage of construction. In addition, it is possible to become a member of a housing cooperative by purchasing a share in it.
Like any other financial instrument, real estate investment has both pros , so minuses .
Among the advantages (+) of this type of investment are the following:
- real estate has high liquidity;
- over a long period of constant profitability, For example By renting out the purchased property, you can make a profit for many years;
- relative availability of investments;
- wide range of investment options.
Despite the significant advantages of investing in real estate, like all existing investment options, they are subject to risk.
The main disadvantages (-) of such investments are:
- the demand for real estate is quite significantly dependent on the economic situation in the country as a whole and a particular region in particular;
- real estate prices are quite high;
- in small towns the demand for real estate is at a fairly low level;
- high additional costs - utilities, repairs, taxes.
Moreover, there is also the possibility force majeure . It happens that the price of a property drops sharply due to insurmountable circumstances. For example, apartments in an ecologically clean area will become cheaper if a factory or a busy highway is built nearby. As a result, the investor will not only earn nothing, but also lose part of the invested money.
To avoid most problems, before investing, it is important to carry out preliminary analysis . It compares possible investment options and examines various factors and circumstances that can affect the value of a property.
Popular options where it is profitable to invest
2. Which real estate is profitable to invest in - 8 popular options + comparison table 📊
Investment experts believe that investing in real estate is much less risky than trading on the stock exchange, investing in startups and businesses. This is explained simply: real estate very rarely gets cheaper.
It is most profitable to invest money in real estate in large cities. This is especially true for residential premises. In this case, there is a direct relationship: The larger the city, the more profitable it is to invest money in real estate. This fact is connected, first of all, with the difference in liquidity for it in different cities.
But it is important to understand that in each locality you can find your own suitable real estate for investment. To get maximum profit, you should spend thorough analysis all existing directions and choose the most profitable one.
Option 1. Residential property
This option is the most accessible private investors. The risk of investing in residential real estate is minimal.
There are two ways to make money by purchasing residential real estate:
- purchase with a view to subsequent resale at a higher cost;
- purchase for rental .
In any case, when buying an apartment, it is important to pay attention to the following criteria:
- location— in a prestigious, residential or student area, environmentally friendly, remote from the city center;
- room layout, including the presence of a balcony, combined or separate bathroom;
- state— availability and quality of repairs;
- infrastructure— how far away are kindergartens, schools, clinics, public transport stops, shops.
In general, any criterion, even a seemingly insignificant one, can be important for buyers:
- view from the window;
- floor;
- neighbours;
- contingent of the location area.
To buy an apartment (or other residential property) as profitably as possible, you will have to look for it on one's own , without the help of a realtor. However, it is important to check the purity of the transaction. We talked about how to do this in both the primary and secondary housing markets in the last issue.
Option 2. Commercial real estate
This option is for more experienced investors. Such investments are suitable for both small office and retail space, and large buildings designed to house warehouses, supermarkets, and production workshops.
Such premises are invariably in quite high demand. A huge number of businessmen are looking for space to conduct business and are ready to give it to the owner rent. Those who purchase commercial real estate are left with a regular profit from their investment.
Rent is a classic option for obtaining . The investor's profit in this case does not depend on the time spent on work.
It is useful for an investor to know that when choosing commercial real estate as an investment object, you need to have a fairly large amount of money. Contributions in this direction usually begin with five -seven million rubles.
Option 3. Land plots
To purchase a plot of land, a smaller amount of money is required than to purchase an apartment or commercial property.
There are a number of advantages of investing in land:
- minimum level of fraud probability;
- no repairs required;
- lack of payment for utilities;
- the purchase procedure is simpler than for other real estate;
- relatively low taxes;
- simple design;
- there is no need to resort to the help of realtors.
All land plots can be classified by purpose of use. For short-term investments with minimal costs, the areas that are used are most suitable for construction . More long-term investments should be done in lands intended for use in agriculture and industry .
But there is also flaws investing in land. Firstly, the state has tightened control over ensuring that land is used in accordance with its intended purpose. Besides, taxes on this type of property have recently been increased.
Option 4. Country real estate
Purchase of country real estate for the purpose of its further resale stably profitable occupation . This is especially typical for large cities due to the fact that increasingly their residents are trying to settle or have the opportunity to relax as far as possible from city noise and dirty air.
There are several options for investing in country real estate:
- acquisition of objects under construction;
- investing in ready-made cottages;
- purchase of land plots intended for the construction of suburban real estate.
The prospects for investing in country real estate increase over time. But when choosing an object to purchase, you should pay attention on its location, existing infrastructure and communications. Other factors that are important for creating comfortable living conditions can also be of great importance.
Option 5. Property under construction
Another investment option is investing in real estate properties under construction (new buildings). Despite the fact that the risk of this option is somewhat higher, you can also get much big profit.
This is explained very simply– a property under construction costs much less than on the secondary market. Therefore, if you invest funds at the initial stage, after completion of construction the prices will most likely increase significantly will grow up. As a result, the investor will receive tangible profits.
Risks when investing in real estate under construction are most often associated with the developer company. If he is unreliable, he increases risk the following situations occur:
- untimely commissioning of the property;
- complete freeze of construction;
- If construction is illegal or there are no permits, the complete demolition of the building is possible.
That is why, before investing in real estate under construction, an investor needs to conduct a thorough analysis of the developer.
It is important to study not only the company’s reputation, but also the following characteristics:
- time of existence of the company;
- number of completed and commissioned facilities;
- whether there have been downtimes during the construction process in the past, their duration and reasons.
Successive stages of investment in construction
5.3. How to invest in construction correctly - 5 main stages
Any investor knows that investing according to a pre-prepared plan allows you to increase the level of profit and minimize the risk of investments. Investments must be made consistently, in accordance with the developed strategy. There are five stages in this process.
Stage 1. Selection of developer
A mandatory and important activity at the initial stage of investing in construction is developer analysis. It is important not only to find out the name of the developer, but also to clarify what his reputation is. Experts recommend investing only in those projects under construction, the construction of which is carried out by a well-known construction company in the city.
When choosing a developer, it is important to consider:
- company reputation;
- how many facilities the company has already put into operation;
- reviews;
- how experienced the company is in complex construction;
- how many investors does the developer have;
- partnerships with credit institutions (banks carefully choose with whom to cooperate, conduct a thorough analysis and do not interact with developers who have a dubious reputation);
- How carefully does the developer comply with the law (the main regulatory act is federal law 214 -FZ).
In Moscow and the Moscow region you can trust the following developers:
GC PIK– one of the largest developers in Russia. The company was founded in 1994, it successfully implements large construction projects throughout Russia. Focuses on construction affordable housing. Over the years of activity, about 250 thousand apartments with an area of 15 million square meters were built. m. It is one of the systemically important enterprises in the Russian economy.
A101 Development— the company has built about 500 thousand sq. m. residential real estate, as well as more than 50 thousand – commercial. The developer is also building kindergartens and schools interacting with the budget. Cooperation has been established with several large banks within the framework of mortgage lending programs. The developer is included in the TOP-5 in the Moscow region and TOP-15 throughout Russia.
Capital Group is a company that deals with the full cycle of construction activities, from analyzing sites for construction to finishing the finished property. 71 projects were completed, resulting in the construction of 7 million square meters. m. of area. The company's facilities were named the best projects in Moscow and the Moscow region.
Stage 2. Selecting an investment object
Another important stage of investing in real estate under construction is selection of a suitable object. The best place to start is in the area where the demand for residential space is highest.
When choosing an investment object, it is important to consider the following parameters:
- infrastructure;
- proximity to public transport stops and metro stations;
- other characteristics that affect the degree of comfort of living.
If you are planning to invest in commercial real estate, you should think about the investor's ultimate goal in advance. It would also be a good idea to draw up a professional business plan.
Stage 3. Negotiations
When the developer and the investment object are selected. You can start conducting negotiations. It is important to understand that, in accordance with the laws of our country, it is impossible to register rights to real estate under construction.
However, the investor has the right:
- draw up a share participation agreement;
- join a construction cooperative;
- register an investment deposit;
- conclude a share agreement.
Experts advise choosing a share participation agreement.
In addition to the method of registering the agreement, the conditions for depositing funds are discussed. The main ones are the acquisition in installments(payment in installments) and one-time deposit of funds, but other options are also possible.
Stage 4. Studying the documentation
All agreements entered into must comply with current legislation. It would be a good idea to check them with the help of an independent lawyer. Many people think that this is a waste of money. But it is not advisable to skimp on transaction security.
Stage 5. Conclusion of an agreement
The final stage of the transaction is conclusion of an agreement. Before signing the final agreement. It is important to carefully study all its points.
In this case, you should pay attention to:
- when is the construction planned to be completed;
- what are the terms of termination;
- the price should be fixed, there should be no conditions on the basis of which it will change;
- fines in case of violation of the terms of the contract must be specified for each party;
- force majeure circumstances.
It is important to approach the transaction for the acquisition of real estate under construction with the utmost care and responsibility. It is important to remember that there are risks that can be reduced by strictly following the sequence of investment stages.
5.4. How to make money on investments in construction - TOP 3 working methods
An investor should know which ways to make money by purchasing real estate under construction are the safest and most proven.
Method 1. Renting
Earnings from the transfer of real estate for rent represent long term investment. But this option has a stable level of profitability.
The payback period in this case exceeds five six years. But do not forget that the areas in any case remain the property of the investor.
In large cities there is a demand for various types of rentals residential real estate : luxury apartments for a day, rooms located in residential areas, studios for young families and others.
If we take into account commercial real estate , it can be noted that the demand for it from entrepreneurs is also consistently high. Particularly popular in large cities are premises located in business and shopping centers. The only disadvantage of commercial space is the need for investment quite large sums of money.
For purchase apartments usually it's enough 1,5 -2,5 million rubles. If you plan to invest in commercial real estate, it will take approximately 2-3 times large sum.
Method 2. Purchasing an apartment under construction for selling it after commissioning
If you purchase real estate under construction for resale, you can recoup your investment quite quickly - already in 1 -2 of the year. The faster the construction of the facility is completed, the more interesting it will be for investors. Particularly successful investors receive income in the amount of 100 % of invested funds.
It is important to evaluate other possible options. It is possible to carry out high-quality repairs in a finished apartment. As a result of such actions, its cost will increase by about a quarter.
Method 3. Participation in collective investments
Investors who are looking for the safest options for investing in real estate under construction can be advised cooperate with intermediaries . In this case, you can become a member professional investment project without buying real estate at all. To do this, it is enough to join a collective investment fund and receive income as a shareholder.
There are several reliable funds in Moscow and the region that invest in real estate. Including those under construction:
E3 Investment- here the minimum entry amount is 100 thousand rubles. When profit is guaranteed at the level 25-90 percent. All investments in the fund are insured. The investor can independently choose the payback period for the investment from six months before two years. Investors' funds are invested by professionals in highly liquid real estate, leaving the investor to make a profit. This option is passive income with guaranteed profit and minimal risk. The company provides information support, as well as free consultations for investors.
Sminex- the company invests in finished apartments, as well as objects at the construction stage. The company builds houses itself; as an additional service, investors receive renovation of apartments. In addition, the company takes care of finding tenants. The company builds cottages, residential buildings, and commercial properties. Experts call the undeniable advantage of the presented organization its focus on achieving high quality of real estate under construction, as well as their safety during operation.
Thus, there are several ways to make money on real estate under construction. They differ not only in the level of profitability, but also in the efforts required from the investor.
5.5. 4 main risks when investing in real estate under construction
Any investment involves the risk of losing your investment. To minimize the likelihood of losses, you should early study what schemes scammers use in the real estate industry, and what you should be afraid of when investing in construction.
Risk 1. “Soap bubble”
The first way to deceive gullible investors is extremely simple. Shell companies sell to gullible investors myth , and not actual objects under construction. All work on construction sites is carried out solely as a distraction.
Often, such projects are organized and conducted with the help of various legal structures. As a result, deals look from the outside absolutely legal. However, as soon as the scammers collect a sufficient amount of money, they disappear along with the investors' contributions.
The first way to identify a soap bubble– greatly reduced value of real estate. An investor should compare prices to the average in the area under consideration. Too low a price should be a concern.
It is also important to make sure that information about the developer is available in the official register. It includes all existing construction companies. Therefore, if the company in question is not on this list, it is not a real legal entity.
Risk 2. Bankruptcy of the developer
There are many reasons why a construction company may go bankrupt:
- ineffective management;
- misuse of funds;
- lack of finances;
- high costs.
Naturally, the lack of money affects not only the construction company itself, but also investors. To avoid such a problem, when choosing a developer, you should focus on large company, which has already put a large number of constructed facilities into operation.
Risk 3. Failure to meet real estate delivery deadlines
Another nuisance for those investing in real estate under construction is failure to meet construction deadlines . This risk is especially unpleasant for those who purchase real estate using credit funds. The lender does not care when the property will be put into operation; it is important to him that all debts are repaid on time and with the appropriate interest.
Experts have come to the conclusion that every day of missed deadlines eats up 0,01 % of investor income. In percentage terms, this is not much. However, in terms of rubles it turns out a decent amount, especially when commissioning is delayed for several months or even years.
Risk 4. Force majeure situations, as well as unpredictable changes in the real estate market
These circumstances can also lead to the loss of part of the investor’s funds. An example of force majeure is the onset of a long economic crisis. As a result, supply in the real estate market may significantly exceed demand. This circumstance leads to significant reduction in property value– often by 10 -20%. Even when the situation levels out, investors will already have lost some of their potential income.
Another example of force majeure is natural disasters (forest fires, floods, earthquakes), wars, industrial disasters. The only way to protect yourself from such risks is insurance of real estate under construction.
Thus, like any type of investment, investing in real estate under construction is accompanied by various risks. Some of them can be minimized by conducting a thorough analysis during the process of selecting an object for acquisition. In other cases, insurance helps avoid unpleasant consequences.
6. Practical recommendations for increasing profits from real estate investments 💎
When investing money in real estate under construction or ready-made, any investor strives maximize final profit. You can do this using the methods below.
Recommendation 1. Make a redevelopment and coordinate (legitimize) it
Redevelopment of a residential property- the simplest option that allows you to make your home more functional without changing its total area. If you carry out redevelopment activities correctly, you can increase the cost of an apartment or house by 15 -30%.
At the same time, you should not carry out uncoordinated redevelopment. All planned changes must be registered with the authorities dealing with these issues. Today it is the architectural department in BTI, as well as the district administration.
It is important to know that the law prohibits making certain types of changes to the layout, For example, demolish load-bearing walls, and also expand the kitchen at the expense of the living space, increasing its size by more than a quarter.
Recommendation 2. Add additional space
This cost increase option is available for private houses and cottages. There you can build additional floors, convert attics into attics, build a balcony or veranda, and make other architectural changes.
Recommendation 3. Make quality repairs
If you make high-quality repairs, the price of the apartment will increase by approximately by 15 -25%. The profit will be higher if you do the repairs yourself, investing only in the purchase of materials.
Important to buy quality materials. Buyers can easily distinguish high-quality consumables from cheap Chinese ones.
Recommendation 4. Convert residential real estate to commercial or vice versa
Having studied the demand for real estate in a certain area, you can convert non-residential real estate to residential and vice versa. Making a profit from repurposing residential space into commercial space is important for large cities, especially for business districts and walkable streets.
Thus, it is important not only to invest in real estate, but also to subsequently try to extract maximum profit from it. And we told you how to do this above.
Ways to invest money in real estate with low capital
7. How to invest in real estate with low capital - 3 real methods 📄
Many people believe that not having a large enough amount of money is an obstacle to investing in real estate, but this is not true. Smart business people are able to get by with minimal funds and also raise additional amounts. There are several methods to do this.
Method 1. Raising borrowed funds
The most popular way to increase investment capital is loan processing for the purchase of real estate. Today, many banks provide such loans.
By the way, we talked about this in one of the previous articles of our magazine.
The investor should take into account the fact that any borrowing is associated with the payment percent. Therefore, it is important to consider additional costs during the analysis process. The planned income must cover the interest on the loan and provide profit.
For a loan, you should apply to large credit organizations with positive reputation.
It is not necessary to take out a loan with interest. Many wealthy relatives give loans to loved ones without charging additional fees.
Method 2. Attracting co-investors
An ideal option for investors who have insufficient capital is unite . For those who have carefully thought through the project and convince others of its effectiveness, finding partners will not be a problem.
Method 3. Choosing the right strategy
Any investor understands that competent investment planning is an important component of their success. Those who lack investment knowledge may be advised to seek help from more experienced investors.
An example of high-quality support for beginners is various investment clubs. Such projects bring together investors who pass on their experience to beginners. Clubs offer various activities– courses and seminars, telling in detail about private investments. Considerable attention is also paid to investments in real estate.
The following questions are studied on the topic of real estate investment:
- strategies;
- how to enter the world of investing with minimal capital;
- investments in various types of real estate;
- rent and sublease.
Thus, insufficient capital is not an obstacle to investment. Any purposeful person will find ways to achieve profitable investment.
8. Help from professionals when investing in real estate ⭐
Help from professionals it's never free. However it helps much increase the level of profitability of investments.
For those investors who wish to minimize risks, but at the same time ensure a sufficiently high profit, it may be advisable to collaborate with experts in the field of real estate investing.
In Russia, three companies working in this direction can be particularly distinguished:
E3 Investment offers long-term investment in different types of real estate. This ensures a high level of income. This is the minimum threshold for entry into the real estate market. Investors can deposit an amount of 100 thousand rubles.
Those wishing to invest in this company can immediately find out the level of expected profit. To do this, just use the calculator on its website.
Contributions to an investment company are characterized by a high degree of reliability. All types of assets have three types of insurance.
Activo offers access to the most liquid areas. Investment security is ensured through independent collective ownership. When investing funds from two million rubles, the company guarantees a profit in the amount of 11,6 %.
The investor purchases real estate and transfers it to professionals for management. The company provides its clients with full reporting every month and also guarantees the safety of their invested funds.
Gordon Rock is a real estate agency represented on the international market. Investors, using the company's services, can invest money in hotels, commercial, and residential real estate located abroad.
The following services are also provided:
- purchasing hotel rooms, catering facilities, medical centers, mini-hotels;
- purchase of real estate for persons of retirement age;
- investing capital in a ready-made business in several countries around the world;
- consultations and seminars on effective investing.
Thus, to invest in real estate, you do not need to have a lot of capital and significant knowledge. It is enough to turn to professionals for help.
9. Frequently asked questions (FAQ) 💬
The topic of investing in real estate is multifaceted and difficult to understand. Therefore, many investors have various questions on this topic. Especially it concerns newcomers . We will try to answer the most popular questions.
Question 1. Where is it more profitable to invest money: in real estate or in a bank for a deposit?
Often people without experience in investing, who have an impressive amount of money, wonder what to do with it - buy an apartment and rent it out or put it in a bank as a deposit?
Let us assume that the investor has available 3 000 000 rubles Let's consider both investment options.
- If you put money in a bank at 10% per annum, you can earn in 12 months 300 thousand rubles, if the terms of the deposit do not provide for capitalization. Read about how to calculate your contribution with replenishment and capitalization in a separate article in our magazine.
- Now let’s assume that an investor bought a one-room apartment in Moscow with the funds he had. By renting it out, he will receive 25 thousand rubles a month. As a result, the same amount of money will accrue in a year 300 thousand rubles.
When comparing the two options, you should not lose sight of the fact that in the case of rent, additional costs arise - for utility bills, taxes, repairs and others. In addition, you will have to spend a significant amount of time searching for a suitable property and settling tenants.
It would seem that deposits are much more profitable than buying an apartment and then renting it out. But this is not entirely true; when analyzing the example, we did not take into account the presence of inflation. The depreciation of funds gradually eats up savings.
It is worth considering an important rule of investment — You can’t trust official data on inflation levels. In fact, money depreciates much faster. It turns out that, at best, the interest on the deposit will cover inflation, but it is unlikely that you will be able to make money on such investments.
At the same time, real estate prices rarely fall. In the long term, its value increases. Rent is also constantly becoming more expensive.
Thus, it turns out that when considering a short-term period, you can earn more on deposits. However, given that apartments are becoming more expensive, it can be noted that real estate helps to more effectively resist inflation.
Question 2. Which property is more profitable to rent out: residential or commercial?
Some investors purposefully analyze the real estate market in order to understand which properties are more profitable to rent out - residential or commercial. In general, it is impossible to answer this question unambiguously, since there are commercial and financial risks in the market.
For large investors, it is usually more preferable commercial real estate . Experts believe that such investments pay off much faster. However, due to their features, they are more difficult for beginners.
Concerning residential real estate , it is profitable to rent it out to those who received it without cash costs, for example, by inheritance or as a gift. When purchasing such a property, it will take a very long time to pay off.
Worth understanding that investing in commercial real estate is quite risky. This is due to the fact that they are more influenced by the situation in the country’s economy, for example, the onset of a crisis period.
Investments in commercial real estate are subject to other types of risks that are difficult to account for. As a result, errors may be made in the process of calculating the required capital, which will ultimately lead to an increase in the likelihood of purchasing an object with low liquidity. Such investments can not only bring profit , but also entail significant losses .
However, speaking about financial relations, it can be noted that in the case of commercial real estate they much more stable than that of residential property owners and their tenants. When renting a commercial property, the tenant is interested in keeping it in proper condition. This is due to the fact that the condition of the areas where activities are carried out shapes customers’ opinions about the company. Renters rarely try to keep their property in the best condition possible.
A special issue is the income received from renting out different types of real estate. Everyone knows that when comparing premises of similar area, commercial properties generate much more income than residential ones.
Note! When buying real estate, an investor must analyze what potential income will it bring? . This is especially true for those properties that are already leased. It is quite possible to make a forecast of the profitability of a property at the time of its acquisition.
You should also compare efforts required to manage multiple properties. Naturally, the objects residential real estate(even if there are several of them and they are located in different parts of the city) are much easier to manage than, for example trade area, divided into parts and leased to several businessmen. It is all the more important that commercial real estate is rented out for a much longer period than residential real estate.
Some investors will argue that today real estate management can be transferred to specialized organizations. But this again requires additional cash investments.
What conclusion can be drawn from this?
Thus, it is more profitable to rent out commercial real estate. However, this requires a significant investment of money and effort from the investor, as well as high-quality knowledge regarding the conditions of the market itself.
Investments in residential real estate are available to a wider group of investors. This will require much less capital. At the same time, such real estate can become a source of practically passive stable income for a very long period of time.
But still, investors who have at least minimal experience in investing in real estate can be given important advice. Before making a choice in favor of any property, it is worth conducting a thorough analysis of all possible options, paying attention to both residential and commercial real estate.
Question 3. How to buy real estate as cheaply as possible?
It is unlikely that anyone will doubt that real estate is a profitable investment option. However, there are ways to significantly improve your bottom line. To do this, you can use tips on how to buy real estate as cheaply as possible. Under good circumstances, you can save about 30 % of cost.
Let's consider the possible options:
1) We discussed in detail acquisition of real estate under construction . Such investments are profitable and have good returns. However, the level of risk in this case is much higher.
Unfortunately, it is possible that the construction of the house by the developer will not be completed on the appointed day. Moreover, there are cases where houses have not been put into operation for many years. In such situations, it is often unclear whether construction work will be completed at all.
In most large cities there are several associations of defrauded shareholders. These people, for various reasons - for personal needs or for investment purposes - bought apartments in houses under construction, but ultimately left with nothing . Suing a construction company can be difficult, especially if it declares bankruptcy.
2) Another option that allows you to reduce the amount of investment is acquisition of real estate without renovation . The investor invests in finishing work, after which the price of the property immediately increases. With a successful combination of circumstances, carrying out high-quality repairs using high-quality materials, you can quickly get about 15 % arrived.
3) Investors with experience in the real estate market use even more interesting ways to save money on purchasing an investment property. For example, many of them acquire real estate confiscated for various reasons and put up for auction .
In the case of recognition of companies, their creditors are interested in returning the money due to them as quickly as possible. Therefore, bankrupt property is often put up for auction at very high prices. greatly reduced prices. We wrote a separate article about trading and trading.
4) Due to the occurrence of a large number of non-payments on mortgages and other types of collateral loans, credit institutions often seize property from their clients, which served as a guarantee of the return of funds under the contract. Such real estate is also sold at reduced prices, since the speed of return of own funds is important to banks.
Where to look for such offers:
On the Internet you can find specialized sites that contain information on the sale of real estate confiscated from debtors, as well as those seized as collateral. Investors often find very interesting investment options here.
In addition, information on the sale of collateral and confiscated real estate of legal entities is contained in the corresponding register for their bankruptcy.
Question 4: What books on real estate investing should a beginner read?
Any issues related to the field of finance require certain knowledge from those involved in them. Therefore, it is important to study specialized literature on the topic of interest. Investments in real estate are no exception.
Book 1.
Many professional investors believe that the best book on real estate investing was created by Robert Kiyosaki. It is called quite trivially - “Investments and real estate”.
Also in this work there is a huge amount of advice that does not lose its relevance, and other stories that professionals share with the reader.
Book 2.
This is the perfect book for newbies in the field of real estate investment. It is told here in an accessible form, beneficially and correctly.
The work contains detailed, high-quality structured instructions on what actions a beginner needs to perform.
Anyone, even without financial education, will be able to extract a lot of useful information from the book by reading it with ease.
Book 3.
This book is ideal for those who have some knowledge of investing. It will help you learn more about how to work with investment objects.
The reader will learn how to choose the most profitable property, how best to work with a huge amount of necessary information and documents.
The work also places great emphasis on how to maximize profits.
Book 4.
Instead, the work contains useful information on how to invest in real estate without risking losing your personal money.
In addition, it tells you how to get a good profit from such investments.
Book 5.
The book tells you what ways, besides reselling, there are to make money from real estate investments.
After reading, the investor begins to realize that there are a huge number of ways to make money by carrying out such activities.
10. Conclusion + video on the topic 🎥
Thus, investing in real estate is a promising way to earn passive income. It does not matter how much money the investor has. In the modern world of investments, you can even start earning money with a small investment.
However, it is important to constantly educate yourself and try to learn as much useful information as possible.
And a video - “How to create inexhaustible income in the real estate market”:
That's all for today. Have a successful and profitable investment in real estate!
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Real estate is the most conservative investment option and the first one anyone would think of. In Russian realities, it is difficult to trust other types of money investments - the stock market is not always transparent and not very developed, bank deposits are accepted at low interest rates, which do not always exceed the rate of inflation. And real estate comes to the fore. Therefore, you need to understand how to invest in real estate, where to invest money and what are the benefits of such investments.
Benefits of investing in real estate
The goal of any investment is to preserve and increase the investor's money. That is, the investment must be profitable and have a stable, or better yet, growing value. The property fully complies with these conditions.
Purchasing residential or commercial real estate can become a source of permanent income in the form of rent; the cost of such premises increases over time; if necessary, they can be sold without much hassle.
But not everything is so simple and before buying any real estate, it is necessary to carry out thorough preparation.
Here are some questions to help you choose the right time and place to invest your money:
- what state the market is in - the market may be in decline, growing or dying down. Such phases replace one another and, having determined the state, you can make a decision to enter or exit the market;
- for how long is the investment calculated - real estate is a long-term project, and you can’t count on a quick payback. The option of speculation can be considered during a growing market and in the period of 1-3 years. It should be taken into account that the payback period for real estate on the primary market may increase by one to two years - the period of renovation of neighboring apartments, at which time the attractiveness of any premises for the tenant decreases;
- desired level of income from real estate - renting an office and an apartment brings different returns and requires different costs. The state of the market also plays an important role. On the rise, it is easier to get a higher rental price, and the cost of the premises itself also increases;
- willingness to devote your time to maintaining real estate - any real estate requires maintenance: cleaning, repairs, communication with various authorities. Such costs vary depending on the type of investment;
- what is the planned amount of investment - the more attractive the area, the higher the investment required, but the return may be higher. In addition, you need to choose a market sector - the costs of residential real estate, a small store, or a plot of land vary quite a lot;
Types of real estate investments
The following types of real estate are chosen as investments:
- residential - apartments and houses;
- commercial - offices, shops, kiosks, this also includes hotels, sanatoriums, recreation centers;
- land.
Each of these types brings different income, requires different costs and carries its own risks.
Risks of real estate investment
Most often investorsface the following risks and difficulties:
- mistake when choosing real estate - sometimes investors' expectations may not be met and the property will not bring the desired return. This is usually due to an error in choosing the location of buildings;
- changes in the market situation - in this case, there may be a decrease in the value of real estate and rent;
- changes in legislation - the introduction of additional taxes and fees may reduce rental income;
- wear and tear - especially important for old facilities; it will require additional investments in repairs and modernization.
In addition, political events also carry certain risks - any changes in the state can seriously affect the value of real estate. Commercial real estate is especially sensitive to such changes. Housing and land are more stable.
When investing in the primary market, there is an added risk of choosing a dishonest developer and there is always a risk of turning to dishonest intermediaries when purchasing real estate.
Investments in real estate are profitable and reliable. Of course, it requires certain knowledge, time spent on preparation and maintenance. But all this will allow you not only to save your investment, but also to receive income for quite a long time.
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Risk assessment plays an important role at the stage of forming an investment strategy, since both the budget and the expectation of profitability largely depend on how much the investor is willing to take risks. Thus, if investors view future real estate investments as low-risk, then they are willing to pay more for each dollar of projected income, thereby lowering the rate of return. That is, the lower the risks, the lower the profitability.
Risk is the likelihood of loss as a result of some change. The greater the chance that a negative event will occur, the greater the risk. For investments in real estate, the most typical two groups of risks are country risks and risks associated with a specific project.
Country risks
Country risks primarily include the likelihood of economic, political and social upheavals in the country where the property is located.
The level of country risk can be found out from the reports of rating agencies or consulting firms. For example, in the rating of The Economist Intelligence Unit, the lowest country risks are in Austria, Great Britain, Germany and the USA, the highest are in Afghanistan, Belarus, Ukraine, etc.
One of the economic factors of country risk is rising inflation. The dependence is as follows: the higher the inflation, the greater the risk. The lowest risk is inflation of less than 5% per year, the greatest - over 100%. The real estate market is insured against inflation risk by the fact that rental prices are revised monthly or annually: rental rates are tied to the retail price index, the dynamics of which reflect inflation. The more often rates are revised, the higher the sensitivity of the object to inflation and the greater the investor's income. For example, hotel rooms, retail, industrial warehouses and short-term rental housing are traditionally considered to have high inflation sensitivity, offices and REITs are considered medium, and land and long-term rental apartments are considered low.
Germany is generally a low-risk country for real estate investment, but there are high-risk regions. In particular, these include the eastern landsAnother economic factor of country risk is associated with instability of the national currency. Regardless of whether its rate is rising or falling, any significant deviation poses a risk. The greatest danger for markets occurs when a currency rises or falls by more than 20%.
Commodity-based economies are also characterized by such a risk factor as decline in oil prices. The lower the prices, the greater the threat to the economy; The greatest risk is a decline in hydrocarbon prices by more than 20%. Thus, according to Savills, against the background of falling oil prices, from 2007 to 2009, apartments in the Russian capital fell by 51%. In January-February 2009, oil prices began to rise, and the cost per square meter also went up. In 2015, oil shows negative dynamics, and housing prices are also declining.
Other economic factors are a decline in GDP, a drop in production rates, a decline in exports and a decrease in the purchasing power of the population. The greatest risk is a decrease in each of these indicators by more than 10%.
Country-specific risks also include socio-political risks. In particular, the real estate market may be negatively affected negative population growth, and this is true not only for the country as a whole, but also for a specific locality, as well as a separate region. For example, the population of East Germany is moving to the more developed and promising western states, so the latter are considered less risky markets for real estate investment (the exception is small towns in the Ruhr region, which is losing population due to a lack of jobs).
Political situation also has a significant impact on investor behavior and risk perception. According to a Tranio study, 17% of surveyed realtors believe that the political situation (along with economic stability) is one of the main reasons why Russian-speaking buyers choose a particular country to buy real estate. This factor is especially pronounced in countries such as the UK, Germany, the USA and France.
Another important country risk is potential changes in legislation, which may affect real estate markets. This may include changes in tax legislation (increasing existing taxes and introducing new ones), introducing restrictive laws regarding construction and investment, as well as introducing restrictions on the movement of capital.
Project risks
Risks associated with the project can be divided into two categories:
- risks of Added Value projects, the goal of which is to create added value;
- risks of rental business.
1. Added Value Projects
Added Value projects include construction and redevelopment. The risk of such projects is quite high, but the profitability is also high - 14–25%.
Main risks associated with construction:
- the cost of land or facility at the entrance may be inflated;
- construction or repairs may be delayed;
- construction or repair estimates may be exceeded;
- the sale price may be lower than expected;
- sales may be slower than planned.
All these risks can “eat up” the profitability, leaving the investor without profit or even with a loss.
All of these risks grow in progression in proportion to the developer’s debt load, that is, the more credit money he uses, the higher each of these risks. In the worst-case scenario, for example, in the case of a high debt load on the construction site and a significant adjustment in cost, it may turn out that the developer or investor will remain at a loss. Experienced developers always calculate various scenarios for the development of events, and those in which the investor exits the project after earning 15–20% (classic scenario) or 20–25% (optimistic scenario) are considered acceptable.
Project risks appear even before work begins. In particular, there is a risk of not obtaining a building permit ( Permit Risk). Its essence is that in the case of investments in redevelopment, major repairs or construction from scratch, for implementation after purchasing land or an object, you need to go through approvals and obtain permits. Usually the price includes the risk of not obtaining the appropriate permit or that it will take a long time. In some countries, developers are willing to take the risk of not obtaining permission.
A comprehensive check - Due Diligence - which includes four types of examination helps to determine the risks associated with a specific object:
- legal due diligence: lawyers check the lease agreement and the availability of a building permit;
- financial and tax due diligence (Financial & Tax Due Diligence): a tax consultant establishes the real costs of maintaining an object, calculates profitability and the amount of tax deductions;
- risk assessment (Chance & Risk): examination of the development prospects of the location, as well as the influence of current and future competitors;
- technical assessment (Technical Due Diligence): examination of the technical condition of real estate (usually not carried out when purchasing new properties).
2. Rental business
The least risky rental properties have the following characteristics:
- location in prestigious areas;
- good technical condition;
- tenants - representatives of the middle class (for residential real estate) or first-tier companies (in the case of commercial properties);
- average rental level available to average tenants;
- the possibility of reprofiling the property (for example, transferring hotel real estate to housing stock or vice versa);
- rental income is not lower than the loan fee.
Location is the most important characteristic: if the property is located in a good area, then the risks will be minimal, and the property will be liquid. However, further risk may be associated development of the area, therefore, when choosing a profitable object, you should take an interest in the development plan and find out whether future and already implemented changes (expansion of the transport network, the emergence of new institutions, etc.) over time can increase the capitalization of the investment object or, conversely, reduce its profitability. For example, if a person bought an apartment in New York with a beautiful view of Central Park, then he a priori ensured the safety of his investment, since there are few apartments with such a view, and there will be no more new ones.
The risk is also bad object state And insufficient technical equipment. The worse the space-planning solutions inside the building, the provision of modern engineering systems and the quality of load-bearing structures, the lower the competitiveness of the object in the market, the lower its cost and demand from tenants, and the higher the risks. Despite the fact that old and worn-out properties can provide good immediate returns, they are always riskier for investment than buildings in good condition.
Tenant quality and lease type can also increase or decrease risks. An investor who is not willing to take the risk of losing a tenant will most likely invest in a property with long-term lease contracts. Conversely, when this risk is acceptable to the investor, he will consider properties with expiring or short-term leases as options.
Another risk comes from choice. financing method and further management of borrowed funds. Typically, the higher the leverage, the higher the risk.
The leverage effect is when the cost of debt financing is cheaper than the profitability of the project. The investor can agree with the bank in such a way as to pay interest on the loan, but pay the minimum amount of the loan amount. This method can increase the operating profitability of an investment. But this method of increasing profitability leads to another risk. If the price of the property decreases when it is necessary to extend the loan agreement, the bank will require proportional recapitalization of the loan and provide additional collateral (margin call). Therefore, it is important to find the right balance of profitability and risk leverage; this is the skill of professional investors.
Capital borrowed for investment must generate a return that exceeds the fee for its use. If the profit from real estate is lower than the loan fee, the investor suffers losses, which are greater the greater the amount of borrowed funds.
According to the expert, another risk has appeared in the real estate market: since loan rates in 2014–2015 in many countries reached the lowest level in history and practically approached zero, in 3–5 years they may rise significantly, and when this will happen, property values will decrease.
The risk also poses remote object control: the remoteness of real estate weakens control over it, so an attempt to manage a foreign project from Russia is associated with great risks. Instead of remote self-management, it is recommended to hire a specialized company.
No less important is the risk associated with deal structuring. There are various schemes that allow you to optimize taxes - for example, a shareholder loan or registration through a series of companies. This increases profitability, but reduces transparency and increases ownership risk. The IRS may not accept the optimization framework and may impose additional taxes and penalties. The transparency of the banking system is increasing around the world, the OECD is introducing measures to counteract base erosion, and Russia is requiring its residents to pay taxes on income received abroad. All these changes increase the risks of excessive structuring of objects in order to optimize taxes. Our recommendation for clients: firstly, consult with tax consultants, and secondly, do not overdo it with optimization, as this is fraught with problems with tax services in the foreseeable future.
The points mentioned above define the main risk - the risk of decreased liquidity, that is, a decrease in the potential for a quick sale without loss of value and a decrease in the potential growth of capitalization in a positive market development scenario. Accordingly, the lower the risks on the points mentioned above, the higher the liquidity, and, as a result, the lower the initial profitability of the object.
Eventually
The main risks when investing in real estate are:
| Country risks | |
| Economic |
|
| Socio-political |
|
| Project risks | |
| Added Value |
|
| Rental business |
|
What to choose - high returns or low risks - depends on the investor himself and his attitude to risks. The main problem many buyers have is that they start the conversation with the question “What is the return?” when the first question should really be “What are the risks, and how can I sell this property in the future?” If an investor wants to earn higher returns, he must be willing to accept more risk.
Yulia Kozhevnikova, Tranio
In Russia, in general, real estate transactions are characterized by a fairly large number of risks:
Country risk (political, legal and financial, including inflation, risk of changes in the tax system, administrative arbitrariness, etc.);
- the risk of illiquidity - delays in the sale of an object beyond the expected marketing time;
- the risk of incompetent management, which will affect the technical condition of the facility and its profitability;
- the risk of a possible change in the relationship between supply and demand;
- risks associated with construction (freezing of capital investments during the construction period, difficult to predict increases in the cost of materials, use of machinery and labor, low liquidity of unfinished construction, etc.);
- the risk of administrative restrictions on the use of the facility;
- the risk of failure of utility networks due to their general poor condition;
- environmental risks, including floods and other natural disasters, as well as accidents at nuclear power plants, salvos and other excess emissions of pollutants into the atmosphere, water, and soil.
The risks arising when investing in real estate can be classified in the same way as the risks of investing in any object
In general, the risks characteristic of real estate markets must first of all be divided into three groups:
1) systematic risks that cannot be diversified and indicate the nature of the relationship between the level of risk of investment in real estate and the average market level of risk in the capital market;
2) unsystematic or manageable risks that can be diversified through the formation of a real estate portfolio;
3) random risks as a result of poor management of real estate.
Sources of uncontrollable risks are:
low liquidity of real estate;
- uncertainty of legislative regulation of real estate transactions;
- uncertainty in taxation;
- competition in the capital market and real estate market;
- duration of the business cycle;
- demographic trends;
- employment trends and changes in the solvency of the population. The main division of risks by sources of occurrence - systematic and unsystematic - is presented in Fig. 4.1.
Division of risks by sources of occurrence
“Manageable risks” in the real estate market include micro-risks:
- terms of the lease agreement;
- level of operational and financial leverage;
- structure of invested capital and its cost;
- share of the real estate market of a certain type;
- location of the property;
Also, the risks of investing in real estate can be classified according to areas of manifestation
Like any risks when investing capital, the risks of investing in real estate can be divided according to the degree of damage into partial, acceptable, critical and catastrophic.
Thus, the classification of risks when investing in real estate is almost similar to the classification of risks when investing in any business.
Division of risks by areas of manifestation
Sources of risk in such a direction of real investment as real estate investment may be:
- type of property;
- changes in the ratio of supply and demand;
- location (including regional risk);
- terms of the lease agreement and provision of loans;
- physical aging and wear and tear of improvements;
- changes in legislative regulation and changes in tax conditions;
inflation;
- features of reinvestment;
- decrease in liquidity.
The risk of choosing the type of real estate for investment means the wrong choice of a specific type of real estate in a generally favorable situation for the development of the real estate market. For example, in conditions where investments in multifunctional real estate could provide a higher rate of return, real capital investments were made in office real estate. A nationwide oversupply of office buildings has turned real and nominal rents into dead weight.
The risk of changes in the relationship between supply and demand. Since the main factors regulating the market for any goods and services are supply and demand, as a result of their interaction, a market of sellers or a market of buyers is created. However, the profitable real estate market has a number of significant features, to clarify which it is necessary to analyze the factors affecting the real estate market in each specific period of time.
The main factors determining the amount of demand are:
- solvency of the population;
- changes in the total population (past, current and projected trends);
- changes in the relationships between different segments of the population, that is, the percentage ratio between population groups with different levels of education, the level of migration, the number of marriages and divorces;
- changes in the tastes and preferences of the population represent an important factor in demand. However, within any real estate market, changes in consumer preferences and tastes are quite difficult to discern. Many real estate professionals rely on their own experience and observations and recognize them almost intuitively, which allows them to follow these changes. Preferences and tastes are highly subjective and therefore very difficult to quantify and predict;
- conditions and availability of financing.
Growing demand is causing increased activity in the real estate market. A prerequisite for growth in demand is the expansion of economic opportunities for potential consumers and the growth of their income, which leads to increased activity in the real estate market. Likewise, a decrease in effective demand usually leads to a depression in the market.
The result of growing demand for real estate is an increase in rents and real estate sales prices, although inflationary trends are also operating in the same direction, which can affect price increases in all market segments.
In the short term, demand parameters are more important than supply parameters, the characteristic feature of which is inelasticity. Significant fluctuations in activity in real estate transactions are largely explained by the inelasticity of supply in the short term. If the purpose of the analysis is to predict the situation in the real estate market (for example, to calculate the possible selling price of a property at some time in the future), special attention must be paid to the analysis of supply factors, since in the long term supply volumes are highly elastic.
We list the factors that determine the size of supply:
- availability of a reserve of empty real estate in a certain market segment;
- volumes of new construction and costs for it, including:
1) intensity of construction (determines the volume of new housing),
2) the situation in the construction industry, to what extent it influences the level of construction costs (determines the availability and prices of production factors),
3) current and potential changes in construction technology and their possible impact on construction costs,
4) the ratio of construction costs and sales prices of real estate,
5) costs for improving undeveloped land plots and their existing supply.
The percentage of all homes or premises that are vacant or unrented (vacancies) is one of the most important indicators of the health and trends of the real estate market. A high vacancy rate leads to lower prices and rents even when there is high demand. Typically, the vacancy rate for single-family residential buildings is less than 5%, and for multifamily buildings it is slightly more than 5%. For business premises this percentage is slightly higher. These are basic ratios that may change depending on the situation in the region. If the supply of vacant units exceeds the normal percentage, there is oversupply and/or insufficient demand in the market. Competition can lead to a forced fall in prices and rents, followed by a reduction in new construction. When vacancy rates fall, prices and rents rise, real estate investment activity increases. It is advisable for companies operating in the real estate market to accumulate information about the dynamics of vacancy levels and have a database. It must be taken into account that vacancy levels for different segments of the real estate market must be calculated separately, since there may be a shortage of real estate in one market segment, and an excess in another.
Location risk is determined by the conditions of the local market and the prospects for the socio-economic development of the region, which are determined by the inflows and outflows of capital from the region, the level of differentiation of employment of the working population, the criminogenicity of the situation in the region, the attitude of the population towards private and foreign capital, the possibilities of interethnic and socio-economic and armed conflicts, ecology of the region, etc.
Rental risk is due to the fact that the tenant cannot pay all the rent stipulated in the contract. The loss on the rental loan is borne by the owner because it takes time to evict a tenant and prepare the premises for a new tenant. This type of risk is most likely to occur in properties with a single tenant.
Physical wear and tear and aging improvements can also reduce the profitability of real estate. Owners often choose to incur significant material costs to make their buildings modern. It is difficult to determine the degree of functional wear and tear because it is largely dependent on the development of new technologies. When new technologies such as elevators, climate control and security are introduced into new competing buildings, older buildings lose their attractiveness to tenants and the owner must either charge lower rents and spend money on building improvements or tolerate lower occupancy rates.
The risk of legislative regulation and changes in tax conditions lies is that the decisions of the authorities require unforeseen expenses or are associated with an increase in property taxes (property, real estate). Unforeseen changes in regulations or taxation may change the cash flow of real estate income from what was expected.
Risks of inflation and reinvestment- relatively smaller risks for investing in real estate. Inflation risk relates to the fact that actual contractual cash flows from rental income may be much lower than expected due to inflation. The longer the lease term, the higher this risk. In a special situation are investments in sold and leased real estate, which are associated with the greatest inflation risk of all types of equity investments due to long lease periods. Reinvestment risk is the opposite of inflation risk because cash earnings received cannot be reinvested at the same rate of return as the original investment. It is also lower for equity invested in unmortgaged real estate.
Liquidity risk. Liquidity of the real estate market for all types of real estate at the macro level it is determined:
- socio-economic situation in the country, region;
- availability of credit, determined by government policy (if the government pursues a “high money” policy, credit is less accessible due to high interest rates);
- the policy of commercial banks reducing or expanding lending secured by real estate.
At the regional level, real estate liquidity is determined by the development prospects of the region, the degree of differentiation of population employment, and the environment.
When calculating the level of risk characteristic of various real estate properties, it is necessary to take into account that the higher level of risk of investment in income-generating real estate compared to the risk of investment in financial assets is determined by the characteristics of income-generating real estate, since significant capital investments are required and there is a strict dependence of the income flow from real estate depending on the situation in the region and its development prospects.
Investment, as a rule, is always associated with a certain amount of risk, and although investments in real estate are considered the most reliable, an investor still needs to be careful when choosing an investment object. Forewarned is forearmed, so the investor needs to study all possible pitfalls and risk real estate investment to avoid financial losses in the future.
Specifics of real estate investment risk
It should be noted that it has its own characteristics, which are determined by its specific features - the need for operational management of the investment process, low liquidity of objects, large expenditures of time and money and long-term payback prospects.
When investing in construction, you should always be prepared for a decrease in the profitability of the project, an excess of real costs over planned ones, sharp jumps in prices for building materials and the freezing of construction projects for this reason, and you should also take into account unforeseen risks of destruction of constructed objects.
Sources of risk may include:
- poorly chosen type of real estate. This risk is associated with fluctuations in supply and demand in the market.
- sharp fluctuations in supply and demand in the market.
- poor location of the property. For example, the selected area or region did not meet investors’ hopes for the rapid development of business in it; accordingly, the demand for offices in this region may fall.
- violation of lease terms. The risk of non-payment by the tenant of the agreed amount, or part thereof.
- wear and tear of buildings. Over time, the price of real estate decreases due to its age and physical wear and tear. Typically, investors prefer to invest additional funds in the repair and reconstruction of facilities.
- changes in tax legislation. The likelihood of increased tax costs due to changes in tax law rates.
- reinvestment.
- inflation. Inflation and reinvestment are the least risk factors for real estate investments.
Pitfalls of fraud when investing in real estate
Very big real estate investment risk when dealing with scammers. When concluding a transaction for the purchase/sale of real estate, or concluding an agreement for shared participation in construction, the investor needs to be extremely careful not to fall into the web of scammers, of whom there are a lot in this area.
The first risk is associated with fake development companies that, without having any documents for the construction of objects, sell projects that have not even begun. Often such a company can build one building for appearances, and then disappears along with the money.
Another sophisticated method of deception is that scammers build houses from the cheapest materials without complying with technical standards, sell them and disappear with the money, and after a couple of years such a building literally “bursts at the seams.”
A very common method of fraud is the sale of real estate using fake documents. As a result, property owners don't even realize their home has been sold until a buyer claims it.
Also a risk for an investor is investing in illegally sold state property, which unscrupulous government officials first re-register as municipal property, and then sell it without having either permission or the appropriate documents.
Investment risk insurance
Any real estate investment risk You can always try to reduce, or even reduce to zero, if you approach the issue competently.
Recently, insurance of investment risks associated with investing in real estate has become increasingly widespread. Now it is already possible to insure a house against untimely commissioning, against the risks of poor-quality construction work, as well as against force majeure circumstances, for example, a fire at a facility under construction.
However, it is impossible to insure against fraud, for example. Insurance companies do not want to consider such cases, considering this to be the competence of law enforcement agencies.
Thus, any investor investing in real estate must weigh all possible risks. To avoid deception or fraud, you should study the information about the owner of the property or construction project as fully as possible, and be sure to consult with a lawyer regarding the intricacies of completing the accompanying papers.
And also do not save on real estate insurance against force majeure situations or failures in the delivery of construction projects.
The main thing to remember is that attentiveness, prudence, lack of haste and emotions are the main rules of an experienced investor.
