Property investment is the involvement of management, purchase, rental, sale, or ownership of a property that can be used as profit. Property development is the improvement of a specific realty property as part of the strategy in the investment of real estate. This is generally considered as a real estate sub-specialty. Relative to the other investment kinds, real estate is a form of asset that has fixed liquidity.
Real estate also is also regarded to be capital intensive and is highly dependent on cash flow. These factors must be well managed and understood otherwise the investor gives himself risks. One of the primary causes for investment to fail in working with real estate happens because the investor experiences a zero cashflow for a long time wherein the amount can’t be sustained, this will result to a forced reselling of the property gone into insolvency.
Acquisition and sources
Acquiring and searching for sources of real estate isn’t hard even though real estate markets in several countries aren’t that efficient or organized when compared with other having instruments of liquid investment. Individual properties are not interchangeable and are unique by themselves. This presents one big challenge to investors who wish to evaluate investments and price opportunities. This is one reason why when looking for properties wherein one can invest in, it involves competition and substantial effort among the investors to be able to purchase properties.
This will be variable with regards to the availability of knowledge. This gives a lot of opportunities for the investors to acquire properties at cheaper prices but poses an increased risk in terms of transaction. Investors of real estate usually use a number of appraisal methods to be able to figure out the value of the property before the purchase.
Sources of properties for investment include:
• Investment Property Companies
• Agents of real estate
• Market listings
• Private sales
• Public auction
As soon as a property fit for investment is found, the investor will negotiate a sale price and terms with the one selling the property, then after the business talk, the contract for sale will be executed. In order to be assisted in the process of acquisition, the investors can sometimes employ attorneys or agents having the knowledge about real estate. This is due to the deal that acquire a real estate posses a lot of complexes which might lead to a very expensive deal if executed improperly.
During property acquisition, the investor makes an offer to buy the reserve of the investor’s right to complete their transaction upon satisfactorily negotiating with the latter. This reservation money can be refunded or not and is a sign for the investor’s willingness and seriousness to purchase the property.
The terms for the offer in investing in property include several contingencies that allow the investor sufficient time to complete diligence and acquire financing before the final purchase. Throughout the contingency period, the one investing usually reserve the right to abolish the offer with no attached penalties and accomplish refund on money deposits. Once the contingencies expired, rescinding usually requires the forfeit of cash deposits and may sometimes leave penalties as well.
That is why, to prevent such penalties, the investor must have a great deal of understanding and knowledge on the venture that he has to overcome. Legal advises from people having investing backgrounds will greatly help to lessen the risk.