cyprus real estate investment
Investing in real estate has been around for hundreds of years and is still one of the most popular investment vehicles. There are many benefits of real estate investments, but today we will focus on Cyprus real estate investment and how to invest in the right way. Going by historical return figures, there’s no doubt that every investor with a long enough investment time horizon should add some real estate investments into their portfolios. While that is an easy decision to make, the real question is how to invest in real estate the right way. In this guide, we will discuss a few things that successful real estate investors do consistently and these little things have certainly helped them become the successful real estate investors they are today. From this perspective, we can consider these as industry secrets.
A THOROUGH EDUCATION IS THE BEST STARTING POINT
This is an open secret, but it’s a secret because many novice investors do not take time to understand the importance of thoroughly educating themselves on the concepts related to real estate investing before jumping right into investing their hard-earned money. Unfortunately, many such investors learn these investing lessons the hard way. Even if an investor has extensive trading or bonds experience, real estate investing is intrinsically different from investing in stocks or bonds. It’s crucial to allocate time to educate himself on real estate investing and the underlying principles of real estate investing. It is also essential that the investor know the area they wish to invest in; for example, Cyprus real estate investment would need to be researched independently from overall investment research.
UNDERSTANDING THAT REAL ESTATE INVESTMENTS ARE LONG-TERM ORIENTED
A common mistake committed by novice real estate investors is expecting investment returns within a short time. However, real estate investments’ inherent nature requires investors to remain patient for an extensive period to generate attractive returns. The importance of understanding the long-term nature of real estate investments cannot be emphasized enough.
Over a long time, carefully executed real estate investments will provide a desirable risk-adjusted return.
The key here is to note how real estate investments have provided unmatched returns over 20 years while exposing investors to a considerably lower risk than many other asset classes. However, in the short-term, real estate investments will most likely provide negative returns as it takes time for property prices to appreciate. There’s a considerable amount of taxes involved when buying and selling properties.
A short-term oriented investor should not consider investing in real estate, and this is one of the top secrets to becoming a successful real estate investor. An investor should be willing to hold on to their real estate properties for many years to get the most out of the investment.
Understanding real estate investing is a long-term process that will do wonders to an investor’s portfolio.
A THOROUGH UNDERSTANDING OF MACRO-ECONOMIC DEVELOPMENTS
Not paying close attention to macro-economic developments is a mistake committed by many real estate investors. It’s surprising to see the number of real estate investors who conduct in-depth analyses on the attractiveness of a particular property without considering the prevailing macro-economic condition at all. This is a costly mistake.
The value of real estate properties is closely linked to a country’s underlying macro-economic condition or a region.
First, interest rates will have a significant impact on the value of a property. When interest rates are low, many individuals and corporates tend to buy properties as it’s cost-effective to use leverage to buy residential or commercial properties. On the other hand, when interest rates are rising, real estate transactions tend to decline considerably. A clear understanding of whether interest rates are poised to move higher or lower can determine an investor’s ability to make correct real estate investment decisions. Failure to gauge a measure of what interest rates would be in a couple of years could lead to an investor’s undesirable outcomes.
Next, it’s important to distinguish between the various macro-economic factors that affect property prices in various real-estate categories. The below table provides good guidance on various factors that determine the value of a real estate property. You can use this table as a guide for your Cyprus real estate investment.
Property type
Factors that determine the value
Office properties
Employment growth, amount of space required per employee
Industrial and warehouse properties
Strength of the economy, the import-export activity of a country, economic growth
Retail properties
Trends in consumer spending
Multi-family properties
Population growth, per-capita income growth
DEVELOP A NICHE
The final secret that we are introducing in this article is selecting a real estate property niche to invest in. Even though real estate investors consistently generate positive returns by investing in a wide array of real estate properties, most highly successful real estate investors discover the real estate property type or the niche that best fits their investment objectives and personal traits.
As with many other things, specializing in a single type of real estate property makes it easy for an investor to focus on macro and microeconomic factors that affect the selected property type, and this provides a clear advantage when it comes to investment decision making. Focusing on too many property types at the same time might become an obstacle in identifying important trends that could have a significant impact on property prices.
For an inexperienced investor, selecting a property niche might sound a daunting task. The first step is to create an investment policy statement to identify their investment objectives, risk tolerance, and the investment time horizon. Next, a thorough understanding of the intrinsic characteristics of different real estate property types should be attained to distinguish between each of these property types. Finally, a decision should be made as to which niche falls best in line with the objectives stated in the investment policy statement.
CONCLUSION On Cyprus Real Estate Investment
Investing in real estate assets is lucrative and can lead to unbeatable returns compared to other asset classes. Historical evidence supports this. However, to remain a successful real estate investor over a long-time horizon, it requires an investor to develop certain skills. In this guide, we introduced some of the most common practices of successful real estate investors. We believe that harnessing these skills could make a meaningful impact on the performance of a real estate investor’s portfolio.
Related: Cyprus Residential Property: Increase of Domestic Demand
