Investing in real estate is one of the smartest decisions any person can make. However, there are a few things you should be aware of, especially if you’re new to the world of real estate.
Kyle Krch, owner of Krch Realty in Reno, Nevada, provides the top three factors anyone thinking of investing in real estate must consider.
Location
The first thing to consider when investing in real estate is the location of the property. According to Kyle Krch, the owner of Krch Realty in Reno, NV, there is really no factor more important than location, as this is one of the most significant determinants of profitability. In an ideal world, you want to invest in a property that is located nearby amenities, outdoor recreational spaces, such as parks or beaches, has scenic views of the surrounding area, and is in an already established or on-the-rise neighborhood.
If you’re specifically looking for commercial properties, then what makes a location attractive is a little different. For example, a business buying a property might be considering the proximity of the building to warehouses, transport hubs, freeways, markets, and the like. Overall, you’ll want to pay close attention to the location of the property you’re thinking of investing in. Consider both the mid- and long-term appeal of the location before investing.
Valuation
Next, Kyle Krch of Krch Realty Reno NV shares that anyone investing in real estate will want to watch out for the valuation of the property. Real estate valuation is important not only when you first purchase the property, but also later on when you wish to sell it. A property’s valuation will determine things like the listing price, taxation, and insurance. There are various ways to come up with a valuation, depending on the type of property. For example, a cost approach, where the cost of the land and construction are taken into account, is most often used for new construction.
An income approach, a method rooted in estimated cash inflows, is most suited to rentals. Then there is the sales comparison approach, a method that is used for both new and old properties, and it is where they compare recent selling prices of properties similar to the one you’re selling. No matter which type of property you intend to invest in, be sure to understand the valuation of it and how it was calculated, as this will help you determine if it is priced fairly before you purchase it and also how you will price it when you eventually sell it.
Whether the Property Already Exists or Is a New Construction
One final factor to watch out for when investing in real estate is whether the property already exists or is in construction. Kyle Krch says there are advantages to both, as well as drawbacks, so knowing exactly what you’re getting yourself into is of utmost importance. With a new construction, the cost is usually more, but it might give the buyer the option to customize the building to their liking. New constructions also tend to feature more modern amenities. However, on the flip side, the risks associated with a building that is under construction or has yet to start construction include delays, increased costs, and the uncertainties that come with building in a new neighborhood.
Oppositely, existing properties are much more convenient and give the buyer faster access to them. They can sometimes be lower cost, but it really depends on the state of the property, whether it is new or old, and what neighborhood it is located in. According to Kyle Krch of Krch Realty, when deciding between a new construction project or an existing property, research the construction company’s reputation and their past projects, review property deeds and appraisal reports, and consider factors like monthly maintenance costs, taxes, and dues to understand the reality of the profit you might make.
