Real Estate Market
keys to the real estate market that you learn
Know the rules
It is the most boring advice, but the first and most important thing of all is to know the rules, laws and regulations well. This way you can do everything right: develop the best strategy, take advantage of opportunities and invest in the right real estate assets within the rules.
All of this will increase your chances of getting a good return. It’s important to know the rules and expenses that govern buying and selling, renting or the regulations for building on land if you don’t want to go bankrupt.
Location matters and a lot
There is a phrase widely used in the real estate world that says that the most important thing when buying a house is to follow the 3 L rule: location, location and location. In Monopoly, statistically, it does not fall equally in all the boxes, being oranges and reds (next to the seasons) the most visited. If you buy them, they will give you more profitability.
A good location is that many people “fall”. In real life, in cities, a good location usually consists of a safe, central neighbourhood, with access to popular places (such as shops, shopping centres or restaurants), close to good schools and well communicated.
In the case of the beach, it consists of being on the first line of beach in the case of the coast, overlooking the sea and with good access to highways or public transport. Obviously the centre is most valued, but within a neighbourhood or even an urbanisation there are also micro-locations and orientations that are better than the others.
Invest with head
Nothing can be more tempting than buying all the properties you fall into, but you’ll soon be ruined. The supply of housing in real life is enormous and it is necessary to select well, what is bought, what is sold, what is rented, for how much it is rented… You have to do everything with your head, knowing the mortgage payments and following a strategy.
You have to carry out a strategy and follow it. Do you want to get hold of specific houses? Buy and negotiate until you have them. Do you prefer to be patrimonialist with the most expensive properties instead of buying to rent those that are more profitable? It’s your decision, but trace the path and follow it.
Throughout the game you will have moments in which you will have to negotiate a purchase, a sale, a rent and/or a barter. In those moments you must control the situation and take advantage of it. In a negotiation everyone is willing to give up on something depending on their need, but these are important moments.
Knowing how to negotiate the price of a house you are buying or selling can make the difference between a good operation or a ruinous one.
You must have plausible arguments with which to convince the other party and know that a good negotiation is one in which everyone rises from the table somewhat dissatisfied because it will be the fairest. If you want a property, don’t forget to make an offer no matter how ridiculous it may seem.
You never know the situation of the other party or what they are willing to accept. On many occasions, moreover, this offer may not be accepted, but it may open the door to another interesting counteroffer that you would not discover if you had not moved the file.
As in Monopoly, it is important to buy several properties and build houses or hotels in different locations, if you start to invest in real estate also should invest diversifying by asset type and areas without putting all the “eggs in the same basket.
In addition to real estate, it is very profitable to invest in other types of assets such as shares (electricity and water in Monopoly) or infrastructure (train stations).
The most expensive properties not always the most profitable ones
In Monopoly, the dark blue boxes are the most expensive and why you get the most money if someone falls into them, but they are not the most profitable.
The reason is that fewer people fall, that their maintenance/building costs are higher and that their purchase/construction price is higher. This means that the money invested in them does not generate as much return as other boxes.
The same thing happens in real life: the best neighbourhoods are the most expensive, but not the most profitable if you are looking for rent. The return on every euro invested is higher in the most modest neighbourhoods.
The problem is that there is usually more risk. For this reason, it is good to find a balance between profitability/risk both in Monopoly and in the real estate market.
You should know if you buy a house to live in, or if you buy a property as an asset or as an investment to rent. They are not equal markets and their purchase should not be faced in the same way.
Buy cheap soon and sell better
This is a maxim in any investment. Take advantage of buoyant moments to sell and situations of falling prices to invest. In Monopoly you can take advantage of someone missing a street to build to request more for that property and vice versa. In real life you should be informed and know the prices and forecasts of the price of housing, which although they are estimates can help you.
The real estate market is more stable than other markets such as the stock market and its cycles of ups and downs tend to be longer and consistent (for better or worse). It is easier to estimate changes in trends although it is never possible to know the depth or altitude that prices will reach.
Maintenance must be taken into account
Home maintenance costs money and must be taken into account every time you buy or sell a property. The IBI, the community, heating, water, electricity, Internet, if there are spills or planned works, … all are expenses.
There are buildings where the Community has premises, janitorial houses or other types of advantages such as solar panels or advertising that reduce costs and make them very attractive. For example, 100 euros of savings per month is equivalent to 36,000 euros over 30 years, a very important amount to take into account.
Achieve passive income
You can do this with passive income, whether it’s dividends, real estate rentals or investment profits.
Diversifying sources of income should be one of the first steps if you want to live more comfortably and without an absolute dependence on wages.
Always maintain a liquidity reserve
Having an emergency cash fund or reserve is always essential. In addition to if an emergency arises it is important because it will allow you to take advantage of opportunities.
How much money should I save? Experts say it is good to have a financial cushion between three and six months your expenses (less conservative) or three and six months income (more conservative).
In addition, this liquidity will allow you not to over-indebtedness in case of need and also be able to buy something if the opportunity arises.