Investing, Real estate

The 4 Cycles of Real Estate Investment

home-and-moneyReal estate is one of the few sectors for investment that promises an assured ROI. However, before making an investment it's important to do your homework first. Always consider a long term strategy that will get you huge amount of wealth over time. Most of the people are investing in property at known areas but are still wondering why they are still not able to make money like the others. It is important to know the ‘why'.

Taking the right steps

Before investing in real estate your first step should be to do a thorough internet research with the clear objective which is how much money this investment is going to yield.

The view adds value to your property. Therefore, the most important thing you should keep in mind during this research prior to purchase of a property is finding the best Location. And it is not only finding the location that is not only good to look at but profitable too. Real estate investment is a booming sector because of its assured returns. However, as a matter of fact, according to a recent finding, more than 85 per cent of the foreclosures from non-owner occupied houses as millions of people considering this as a profitable business option. This also means people have bought a vacation home or another property for investment purpose and that decision have got them into financial issues. It usually happens when people buy a property just to freeze the amount and they end up buying in wrong location. So now the question is how to find the correct location to invest?

In real estate any location can become a good location to invest as long as the timing is right. There are 4 cycles of real estate investment and these cycles can run from 7 to 40 years totally depending upon the government.

Let us discuss the 4 types of cycle in the Real estate investment:

  • Buyers Stage 1

1. Oversupply of asset in the market.

2. Rent prices are falling.

3. Increase in unemployment.

4. Sales are getting stagnant and the prices of newly constructed properties are high.

5. Highest rate in Foreclosures.

6. Investment properties are not being bought.

In this phase the rates are declining so it is advisable that you do not buy anything and wait for a good time as you do not know how low the market will go. In case the local government is not taking necessary actions at this point then you need to be more cautious. So to minimize your risk always try and buy a land with a lot of equity and good cash flow.

  • Buyers Stage 2

1. New constructions not taking place.

2. Increase in housing demand.

3. Lower rents and prices of property.

5. Decrease in foreclosures.

6. Increase in jobs.

7. Increase in demand for property as buyers are able to purchase at lowered prices.

In this phase the local government is attracting new business into the area. New jobs are there in that area which include bakers, butchers, and candlestick makers. These are support jobs which are required to service the new residents in the area.

  • Sellers Stage 1

1. Increase in demand for property.

2. Taxes on property are increasing.

4. Decrease in unemployment.

This phase is quite risky to make an investment in property because you have no idea that when is the ‘sellers stage 2' coming. So always be sure enough of the signals of the upcoming phase so that you leave the market at the best time.

  • Sellers Stage 2

1. Sharp increase in the supply of properties.

2. New houses are constructed.

4. Slowing down in the new job opportunity.

5. New real estate projects are coming in.

6. Increase in first time home buyers.

In this phase you can easily pick up some good deal from the new first time real estate investors who have invested in this phase.

Having the information about the above mentioned points can keep you in a better position while investing your finances in any property deal. Therefore, it is extremely important that you do your homework before you invest in real estate.

Kunal Chhibber is a professional content writer with expert skills in digital marketing. He has also written many informative write-ups doing exclusive research on new projects in the Indian real estate sector. He is a graduate in management; music is a passionate hobby to which he is committed to as a part time Disc Jockey.

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