Fundamentals of ensuring a successful real estate investment
Investing in real estate is similar to investing in stocks in that earning a profit from investing in real estate relies on determining the value of the real estate you are considering buying and then estimating the amount of profit that will be generated from those investments. , by rental or sale (ownership). However, investing in real estate requires a relatively long time frame and large capital. Therefore, the expected profit should be proportional to the amount invested and the time required.
That is, determining the expected future return on a real estate investment, as this step gives you a clear vision of the feasibility of this investment based on current and future information about the real estate market and then analyzes it to estimate the required capital and the required capital. time period.
The real estate market, like any other market, is subject to constant changes accompanied by price fluctuations. Therefore, in terms of increase or decrease in real estate prices, market movements and current conditions are considered as the main factors affecting investment decisions. Here, it is preferred to buy the real estate when the price is low and sell it when the demand increases.
Examine the residential area
If you want to make a successful real estate investment, you should know exactly the residential area you want to buy in terms of services offered, prices and population. Some people recommend investing in where you work or live because you will be more aware of the advantages and disadvantages of the area.
Buy below market price
When you buy a property and sell it in a short time, you should not buy the property at market price. A successful investment is to buy the property at a lower than market price so you can sell it at a higher price to make the required profit.
One of the most important factors contributing to the success of the real estate investment experience is choosing a property that can generate sustained profits over the expected period. A particular property may be unsuitable to buy, lease or own for a certain period of time, prolonging the property’s downtime and therefore not making a profit. Therefore, make sure that the property can be utilized by renting or owning it within a short period of time.
Identify operating costs and expenses
These are expenses such as the interest rate you incur in the first steps of real estate investment and the fees related to real estate financing, real estate valuation and consultancy fees, and the fees you pay after you receive the real estate. insurance premiums, administrative fees, maintenance fees and maintenance costs of the facilities, all these costs reduce the net profit from the investment.
Seize opportunities in new areas
Investing in new or under construction residential areas is a good opportunity because when this area grows and demand increases, you can make a profit as the cost of purchasing will decrease and then it will be sold at higher prices.
Do not forget to consult with contractors and experts in the market, as you always need their services and advice, provided you are sure of the accuracy of the information and the quality of service to get the best investment results at the lowest possible price.
Rental prices are falling
If you are planning to buy a property and then earn on rent, you should evaluate this investment objectively at the lowest expected rental price so that you don’t get to a stage where rental income unexpectedly declines and then net profit drops.
The most important banking terms used in the financing agreement
Minimum salary: The monthly income required to qualify for a particular financing product.
Salary transfer: Some banks require the customer to open a bank account with them and then transfer the salary in order to receive the financing product.
Total salary: Basic monthly salary after deducting pension and insurance benefits in addition to fixed benefits.
Debt Burden Ratio: This ratio expresses the bank liabilities that the customer pays monthly based on the monthly salary.
Where the Saudi Arabian Monetary Authority puts a maximum of 33% of the monthly income that the client can pay off his debts. The debt burden ratio may differ from customer to customer, depending on the group of financing products applied.
Financing payback period/period: It is the repayment period of the financing amount together with the fees and interests to be paid.
For example, in the case of individual or vehicle financing, the financing payback period is up to 5 years, and in the case of real estate financing, the payback period is up to 30 years.
Advance Payment: Advance is required if applying for a mortgage or vehicle finance product.
For example, according to the latest regulations of the Saudi Arabian Monetary Agency for real estate financing, the down payment required to obtain real estate financing is estimated at 15% of the financing amount.