Curious about the investment potential of real estate or wondering if advetorials promising millions of pounds in returns through real estate investment are real? The first thing to do here is to learn how wealth is created through real estate.
This article won’t focus on the strategies to profit from real estate. Instead, it will focus on the basic ways that money can be generated through real estate. What’s clear is that this hasn’t changed in centuries.
Appreciation
This is the most common source of real estate profit. It is the increase in the value of a particular property. Appreciation is attained in different ways for varied types of real estate. More importantly, it is only achieved through selling or refinancing. If you’re considering refinancing, you can make use mortgage calculators available online to calculate current refinance rates.
Raw Land
The main source of appreciation for undeveloped land is developing it into either a residential or commercial area. As a city expand, land outside the limits becomes increasingly valuable because of the potential for it to be got by developers. Then developers build properties on the land that raise that value even further.
Appreciation in land may also come from findings of valuable minerals or materials, as long as the buyer holds the rights to the land. Examples of this would be discovering oil, gems, or other precious minerals. Appreciation can also come from gravel deposits, trees and more.
Commercial Property
Commercial properties gain value for the same reasons as the previous two types. Through its location, development, and improvements. Good commercial properties are in high demand, and that drives the price up on them.
Residential Property
Location is the biggest factor in residential property appreciation. As the neighbourhood around a home develops, adding transit routes, shopping centres, schools, playgrounds, restaurants and so on, the value rises. This trend may also work in reverse, with home values dropping as a neighbourhood declines.
The best place to start looking for residential property is online through listings provided by real estate brokers and agents. There are also websites created by developers that contain full information regarding their projects like the Australian house and land by Lendlease. Check it out. Keep in mind that you should purchase a good property in an equally good neighbourhood. This ensures a good investment and a chance for bigger appreciation in the future.
Home improvement projects can also add value and spur appreciation. This is something property owners can directly control. Adding a new bathroom, upgrading to a heated garage and remodelling to a techier kitchen are just some of the ways a property’s value can increase. Many of these methods have been leveraged to high-return fixes by property experts who focus on adding value to a home in a short period of time.
Residential Property Income
The majority of residential property income comes through basic rent. Tenants pay a fixed amount per month. This can go up with inflation and demand, plus you take out your costs from it and claim the residual portion as your rental income. You will get an insurance payout if your tenants destroyed the place (hopefully not), the payout only covers the cost of replacing what is lost and is not actually an income.
DYOR (Do Your Own Research)
You can learn more about property investment through various real estate websites in your country. You should also talk to a professional real estate broker or agent if you’re actively looking to purchase a property. Best of luck!