6 Tips to Increase Value in Real Estate Investment
1. Select the property near district of office/community Tip for real estate investment; the first thing you have to consider is “location” we know that location has an influence to a property that it will be sold out or still remain in market. Good location will make a property be sold out easily or found a tenant quickly that each location will be suitable for real estate in each type differently up to purpose. This is how to select the location by well-known real estate investor, Donald Trump. (Reference: Key to Investing in Condos)
Donald Trump mentioned the key to success in selecting the location as follow:
“The key to success in selecting the location of Trump.
1) Be Willing to Pay Premium for a Prime Location.
2) Don't Buy without a Creative Vision for Adding Significant Value.
3) Four Things Trump Looks for in a Location.
- Great Views.
- Prestige.
- Growth Potential.
- Convenience.”
2. Select the property that attract tenants the property is located on good location both in community, travel convenient and safe from robbery as well as the condition of property because some property might be look so old because doesn't get cleaning and maintenance that make its value decreased. So, it should be got maintenance and repair (every 5 years). Just only repaint to make it look new, it will makes such property has more value and be worthy if compared to repainting cost.
3. Purchase under value (Under value) For this point, you may have ability to estimate and experience to predict the real estate circumstance and economic situation as well as development tendency of city both in the present and future to search the real estate that its price not yet be a the true value. For beginner, you have to start from practice to look, practice to estimate, practice to estimate the situation by news and keep an eye on movement of value, economic state, and environment of such property. If you do these things frequently, you will get a knowledge and can imagine to things which are going to happen better than others that make your next investment has more performance.
4. Instant Equity (Instant Equity) means to purchase ownership of such property by select the property that original homeowner want to stay or has lease agreement already. This way has an advantage that buyers don’t need to find tenant and shorten the time as well as make more returns from opportunity cost reduction of capital that you invested. If you purchase but there’s no tenant, you may have to waste a time to find tenant 1-2 month and such duration doesn’t make the income to capital that you invested. Moreover, if you find tenant unhurriedly, other costs will be happen both tax, maintenance cost that make your returns reduced.
5. Refinance To have lower interest rate, Refinance is one of the way to manage the capital to reduce effective interest rate and can reduce principle faster, making return on investment (ROI) increase.
6. Sign contract with new tenant frequently The longer Lease agreement term is, the more disadvantageous you are because owner cannot increase rents in the case of rent rate tends to higher indefinitely but it will be advantageous in the case of rent rate tends to decrease. Generally, lease agreement will has the term not over 3 years because if over 3 years, it must be registered with the Land Department. Short-term lease agreement has the advantage that able to increase rents when rents in such area are increasing. However, it depends on the estimation of housing rental market situation about demand and supply.
