Q. I've heard that a house ideal for living may differ from a good investment property. What should I consider if I want to invest in real estate?
While it's great to find a home with increasing property value to reap the benefits of real estate investment, it's important to note that a house ideal for living and a good investment property might be different. The criteria for choosing a home for living and an investment property vary. If you want to invest in real estate for profit, here are some factors to consider when looking for a property.
1. Will the Neighborhood Improve in the Future?
The most influential factor in rising property prices is whether the area will undergo development. Investing in real estate in areas with upcoming development projects or attracting large corporations is a smart move. When the government or local authorities plan to develop an area or when major corporations decide to set up offices or factories there, you can expect to benefit from the resulting development. As more people gather for job opportunities, various infrastructure will also flourish, and improved transportation, such as trains or subways, will contribute to the rising property prices. Be sure to check local news, city hall websites, and industrial zone plans to gather information on potential development.
2. Will the Property Price Appreciate?
Once you've chosen a promising area for investment, you need to select the right property to invest in. Properties in areas receiving high attention are classified into three levels: first-class, second-class, and third-class. The property prices in first-class locations tend to increase the most, followed by second-class locations, and then third-class locations. Additionally, newer properties in the same area tend to appreciate faster. Purchasing a property that has already shown a recent increase in value means that you may profit in a shorter period.
To make a safe investment decision, consider the following indicators:
- Future supply in the next three years: Check how many new properties are planned for the area in the next three years. If there is a high supply forecast, the prices might not increase substantially.
- Transaction volume: If there has been a sudden increase in property transactions in the area, it might indicate that prices have peaked.
- Rental price decline: If rental prices drop, it indicates a decrease in actual demand, which can lead to a decline in property values.
- Transaction price decline: If transaction prices drop, it might suggest a decrease in investment demand, affecting property values in the long run.
Remember that these indicators are just guidelines and may not always predict the future accurately.
Q. What should I be cautious about when selecting an investment property?
Once you have chosen the area you want to invest in, it's time to visit potential properties. Real estate investment involves purchasing a property with the intention of selling it at a higher price later.
Before making a decision, prepare for your property search:
1. Contact local real estate agents in the desired area: Like searching for a place to live, you will need to contact multiple real estate agents and inform them of your intention to invest in the area. Asking for information on various properties available and their potential for growth can help you find the best investment opportunities.
2. Verify the area: As mentioned earlier, check if the area is indeed developing and attracting investment. Look for signs of upcoming development, such as new infrastructure or public projects, and evaluate how close the area is to major transportation hubs.
3. Check the condition of the property: Pay close attention to the condition of the property, especially if it's an older property. Visit on rainy days to check for any leaks or hidden issues, and inspect for mold or other signs of damage. If multiple properties in the same building are on sale, it might indicate potential problems with the building's management.
Finally, don't rush into a contract after visiting the property. Take your time to consider and gather information from different sources to make an informed investment decision.