One of the keys to invest in real estate is to know your risk profile and use it in your favor to make a safe movement in your money. How to do it intelligently?
The real estate market is very broad, because it allows you to make different types of investments depending on your final objective; The three main movements when investing in real estate are rent, remodeling and resale and to define which of these schemes is best for you, now we tell you what level of risk each one presents.
What is the risk profile?
To know what type of investment in the real estate sector is best for you, you need to know your risk profile as an investor, it is important for you to know that this profile refers to the factors that can influence the investment whether or not it has the expected success.
Investor profiles
The CONDUSEF has divided the types of investors in three major areas:
Samantha Álvarez, an investment specialist at Grupo Expansión, explains that there are several questions you can answer to give you an idea of your investment profile:
- What is my investment objective and in what period of time I expect to see results?
- What is the profitability that I hope to obtain with my investment?
- How comfortable do I feel taking financial risks?
- What is my current and long-term financial projection?
- What are my income compared to my financial obligations?
Once you know the type of investor you identify with, it is easier to know what risks you are willing to take when investing in real estate, depending on the purpose for which you want to use it.
Rental
The modality of investing in real estate to put them to rent implies the immediate benefit of generating liquidity in less time than when there is a sale , although it is also less the amount received because it is divided into several payments. This can be a monthly housing income or a daily vacation rental.
In this modality, the location of the property is one of the most important factors to consider , since those that are close to main avenues, services and key points of entertainment, are those that will demand the most. As well as the amenities included in the project so that guests are willing to pay for them a little more.
The location will define the price of the rent and the surplus value of the property in the medium and long term
On the other hand, consider if your property includes maintenance costs, since sometimes you end up spending more than you receive because you have to have someone who is giving service to that property. Take into account all the additional costs to include it in the value of your income.
Remodeling
Investing in real estate gives you the possibility of remodeling the property and then selling it at a higher price than you bought it.
One of the risks that you should contemplate is the investment you will need to carry out the remodeling , since you must take into account that there are very old properties that do not have the new water or electricity installations and it will be necessary to make the change if you want to achieve a good sale later.
It includes all the repairs and relevant changes to transform the property and make it more attractive to potential buyers or tenants
You should also consider that this form of investment involves a longer process for the time between the acquisition of the property, remodeling, and sale, so you should project your earnings in the medium and long term. Forecasting time allows you to avoid the risk of running out of liquidity in the process or losing financial balance in your investments.
Resale
The key to resale is to gain surplus value , so this investment model can not be considered in the short term. The growing real estate market throughout Mexico has increased by 6% , especially in areas such as the Riviera Maya .
It is estimated that the real estate industry in Mexico will have a growth of 10%, compared to the same period of 2018, according to the Mexican Association of Real Estate Professionals (AMPI).
The main risks that can occur with the resale can be related to the time to enjoy the profits , although these arrive accumulated, since it is paid in less number of exhibitions. Also, there may also be a decline in the level of surplus value in the area, so it is a good idea to study how the market where you want to buy is developing.
Some important factors to consider to avoid risks when investing in a property to resell are:
How to avoid risks when investing in real estate?
Mario Pantanetti, financial and book auto “Invest and Win” describes some tips you can apply before making an investment to reduce the risk, regardless of what you do with your property.
- Have your investment profile defined.
- Have defined an investment plan or even, know what kind of investments you could take into account.
- Know clearly the risk that you are willing to assume; to be able to select investments of similar or lesser risk.
- Train and learn about each investment vehicle before investing.
- Never invest emotionally.
And you, what kind of risk are you willing to take?
Source: found master brokers
The Mazatlan Post
