The fact that one of the most common investments is in real estate proves that it is a great decision. This type of investment of free funds is present both in our country and abroad. The real estate market has never experienced such a significant expansion. Increasing demand inevitably raises the price of real estate, so now is the right time for this type of investment.
Are you investing or saving when purchasing real estate? Both of these answers are valid and, most importantly – cost-effective. Investing in real estate or a form of savings with which to invest in the purchase of real estate brings many advantages, the most important being that real estate is the "currency" which is the most resistant to inflation. However, what needs to be taken into account?
As with any investment, the question of profitability arises. If, after putting it on paper, you assess that real estate investment is a long-term, cost-effective solution for you, then there is no reason to change your mind. However, suppose you are planning to buy a property through a loan, for the payment of which it is necessary to set aside monthly instalments that should be returned to you through the monthly rental of a newly purchased apartment. In that case, it is wise to inquire about all the lending costs. Indeed, buying for cash is the ideal solution, but often, this is not the case, so customers turn to the solutions that banks offer. Hence, the instalment to the bank, together with all the accompanying costs related to the loan and the monthly rent, on the other hand, are two factors that make the investment in the property (un)profitable.
When the decision to invest in real estate has already been made, in the case of buying an apartment (there will be more talk about what real estate implies later) to rent it later, think about who the target group is, i.e., what kind of tenants do you want? Would you instead rent the apartment to a family or a couple, or would you also like to rent the apartment to students? If you choose the second option, buying an apartment in one of the university cities in Serbia would be wise because then you increase the chances of having tenants at all times. You should also consider whether you want to rent an equipped or unfurnished apartment, as any investment in furnishing often affects the growth of monthly rents. When renting to students, furnishing is mandatory because most students who come to larger cities to study still do not have furniture and are always searching for furnished apartments.
The three most common types of real estate in which investments are made are apartments, business premises (which also include halls and warehouses) and arable land.
Real estate investment usually involves buying an apartment for rent or sale after adaptation. Investing in purchasing office space or land with a plan to find a tenant can also be a lucrative solution. No matter what type of property, the location is a significant factor in demand and, therefore, in the rental or sale price formation.
When renting an apartment, remember that smaller apartments are generally more in demand than larger ones. For example, if you want to rent an apartment to students, it is pretty enough to choose an area of up to approximately 40 square meters for this purpose and invest money in it for furnishing. This will bring you lower costs than investing in a larger space. If, during the summer months, when there is a break at the university, the apartment will be unoccupied. And the costs of the utilities that you will pay will be (in proportion to the square footage) lower.
The potential risk of unprofitable investments is an ever-present factor which does not have to define the outcome. What is important is that you stick to the calculation you put on paper and follow the flow of investing your money. At the moment when you estimate that investments will become unprofitable – react without waiting and hoping for a change that will happen on its own.
The first half of 2023 began similarly to the last year – real estate prices have been higher than a few years ago due to political and economic turmoil, and almost everyone hopes for stabilisation. Unstoppable growth in the price per square meter in all corners of the country was accompanied by higher demand for real estate. Opinions about the cause of the higher demand are divided – some believe this is due to the increasing immigration of foreign citizens to Serbia. In contrast, others blame the situation on the world market for the higher price. In anticipation of stabilising all markets in our country, including the real estate market, we can still claim that real estate investment is a great way to preserve the value of your property.
If we now focus only on purchasing an apartment as a form of real estate investment, you will probably be asked which is a better choice – buying an apartment in a new building or an old one.
Old construction does not necessarily mean that the apartment needs a complete renovation or adaptation that will cost a lot. The seller may have invested funds before the sale to sell the apartment in which it is not necessary to invest. Also, if you assess that renovation is needed, calculate the approximate cost and think whether it is worth it. Newly constructed apartments are often in demand for purchase precisely because there is no need for renovation or repair.
This is the second question you are likely to ask yourself. Do you want to sell or rent the property you are investing in? What do you see as a better option?
The answer to these two questions depends on your plans. If you plan to buy an apartment and rent it out (long-term or short-term), you probably know the characteristics of both short-term and long-term rentals. You are undoubtedly aware of the advantages and disadvantages of having irresponsible tenants. You have probably heard stories (or have had such situations in your experience) where tenants caused damage to the apartment due to reckless behaviour that even the attached deposit was unable to cover or that some significant financial damage was caused to the landlord due to unpaid bills, etc. Of course, this is not typical behaviour of all tenants, so do not get discouraged from pursuing your idea. If you want to rent an apartment and thus earn passive income, inquire about your rights and obligations as a landlord.
On the other hand, selling a purchased apartment does not bring concerns about tenants' behaviour towards the space in which they live. However, this is a somewhat more complicated process because selling is more complex than renting. What complicates sales? People hate the paperwork and taxes even more. Therefore, if you decide on this option, we recommend getting the professional support of a real estate agency. They will make the process smoother from beginning to end and provide professional advice and assistance.
If we agree that investing in real estate is the most popular way of investing financial assets, do we also agree that it is the most stable? Is this type of investment capable of preserving the value of the money invested the most and ensuring its return (whether through sale or issuance) when the owner feels the need to do so? Can the same property, if necessary, be used for housing when the owner decides he no longer wants to rent?
Yes!
We believe that this form of investment is very cost-effective, so it will be present for a long time because of all its benefits.
To ensure that your funds are invested in the best possible way – we advise you to think carefully about each decision and put all investments and expenditures on paper. When you perform the calculation, you will know whether to rent or sell the purchased property and how you will be able to generate more investment income. When you decide, be sure to hire a real estate agency with enough knowledge and experience to make selling or leasing the property as easy as possible.
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