The average long-term return from residential and diversified real estate investment is 10.6%, which is more than what you can earn from the S&P 500 Index. For commercial real estate, it is 9.5%. But the best returns are in distressed properties. You can expect to get a return of 20%, according to data collected by RealtyTrac. The actual ROI will, of course, depend on how much money you invest, the location of your property, and a few other factors.
Real Estate is a Good Investment, Irrespective of the Market Swings
Real estate remains one of the most lucrative investment areas. Sure enough, the realty market goes through swings, but if you invest correctly, you can certainly expect a good return. Sometimes, the returns are even better than stocks and gold, provided you keep a few critical things in mind when buying the property.
The biggest worry about buying a home is the long-term commitment of having to repay the mortgage. For instance, what would happen if you suddenly need a lot of money? You can get the money you need, thanks to the appreciating value of your home and by taking out a reverse mortgage. A reverse mortgage loan lets you convert a part of this equity into cash. All you have to do is release the equity on your property, and you will have the funds for an emergency, to go on an exotic holiday, to make urgent repairs, or for any other legitimate reason.
You don’t have to repay the reverse mortgage loan. It is paid back at the time you vacate the home or sell it.
What You Must Remember When Buying the Property
- New or Old Property – There will be little capital growth in new apartments, as a lot of your money will go towards paying a premium price to your developer. An apartment in a block where there are mostly owner-occupiers could be a better choice as they usually take better care. The problem with new properties is that many of the owners are investors who don’t live there.
- The Location – This is always very important when you want long-term returns. Suburbs usually outperform cities as there is more scope of redevelopment here. Narrow down by proximity to a major employer, shopping, transportation, hospitals, colleges, universities, and restaurants. Pick a central location and you will fetch better money from renters. Bradford Woods near Pittsburg, Glendale near St. Louis, Fishers near Indianapolis, and Devon near Philadelphia currently rank amongst the best suburbs in the United States where you can buy a house. Budapest, Skopje, and Amsterdam are the three top cities in Europe for property buying.
- Future Development – Look at the development plans in the area once you have narrowed down your search. What is likely to happen in the next 10 years? Are big realtors planning to move in? Will a high-speed train connection come here soon? Try to pick a location that is in the early stages of growth.
- Employment Opportunities – A good job market will always attract more tenants. Find out if a large business is planning to move in. Job seekers are sure to follow. College towns are good because there is always a steady flow of students who need off-campus housing.
- Amenities – Look for attractions nearby that will be a big draw, such as parks, gyms, movie theaters, shopping malls, and schools.
Do your research, speak to people, study up, and you can certainly expect very good returns from your property investment. There are plenty of opportunities. Never make a hasty decision when you are buying real estate. For most people, this is the biggest investment they will make in their lives.