Investments through Real Estates: Trading tips for better returns

Investments through real estate trading has emerged with a huge profit potential over the last few decades. If you are planning to invest in real estates, we hope you will find this "how to" guide for investments through real estate trading tips quite handy. Keep reading!

Investments through real estate trading is emerging as a popular trend nowadays. Before we move on to discussing investments through real estate trading, tips for secure investments and possible risk factors, let us talk about a working definition of real estate trading to understand it's basic concepts.

Basics of investments through real estate trading

In simple language, real estate trading is totally a buy and sell affair. A real estate trader buys a property in the area where there are high chances of increasing the value of the property after some time. Trader after buying the property holds it for a specific period of time or until that point when the price of the property increases to his desire and then sells it to the buyer with a significant amount of profit.

A true real estate trader never spends money on the renovation of the property and sells it as it is. There is big controversy on this thought although as some school of economics favours the renovation while some don't. I am also from the first school thoughts that a small renovation of the bought property can really enhance the value of your property many times while selling.
There is another aspect of the real estate trading termed as swapping or flipping process. Before start doing investment in real estate trading you should also know that what is flipping process? Flipping process is mutual trading of property among the real estate traders themselves. In this process, one trader buys the property of other trader just in a wish that one day the price of that property will inflate.

Investments through real estate trading - tips to make higher profits

How to make profit by investments through real estate trading is a much asked question, as everyone is keen to make the most profit from it. In this cut throat competition, you have to learn some simple basics of real estate trading to be ahead from your competitors. Here I am enlisting some of the key points which you must know before making any investment in the real estate trading.

Investments through real estate: Trading tips for market assessment

Before planning to do any investment you should do a proper analysis of the market. Analysis of the market depends on the following factors-

a) Checking the price of the property of the locality.
b) Potential of the property to give profit in the nearby future.
c) Locality around the property; whether it is nearby an urban locality or rural area?
d) How much is your capital for the investment?

I am sure after making your assessment on the basis of above points you will be in a very good position to put your first foot in the train of real estate trading.

Selection of the property for trading

After having completed your assessment of the real assessment market, now you should have 4 to 5 hot properties to buy for trading. The next job which will be in your hand will be to select which property will be suitable for buying? You can select the hot property for you trading by considering following points.

a) Always remember the golden rule that property nearby a metropolitan city or industrial area always have a fair chance to have high value in the nearby future.

b) People prefer to buy those properties which have all the basic necessities like good schools, banks, shopping malls etc. very close to them. So, always focus on such properties which give access to such necessities.

c) Don't ever go for such properties which have any sort of dispute going on, no matter how cheap it is? As there will be fair chance that the price of such properties will decline further in the future.

d) Give more preference to those sellers who have fair amount of reputation in the market. Buying the property from an unknown can really put you in the trouble.

Selection of the financer for your financial needs

As, real estate trading requires huge capital so it may be possible that sometimes you may run out of budget. In such situations you need a financial assistance. Nowadays, there are lots of financial institutions including banks which provide you loan for buying a new property or home for investment.
In my personal view, banks are always safer option on the terms of reliability than other institutions. Before applying for the loan in any bank or financial institution you should have following points in your mind.

a) Interest rates on the loan amount
b) Repayment options including the total period for which loan is sanctioned.
c) Documents required along with the procedure of applying for the loan.
d) Time taken for sanctioning of the loan.
e) Processing fee for sanctioning of the loan.
f) Other charges for the sanctioning of loan.

After considering the above points you will definitely select a good bank or financial institution to assist you in the real estate trading.

Selling your property at the right time and at a right price

As every real estate trader buys a property to sell it ultimately but the biggest question which comes in the front of every real estate trader is that when to sell the property? Every trader has its own parameters on which he decides to sell a property. Here are some of the following key points which should be considered to find the right tie for selling his property.

a) In the anticipation of earning more sometimes hold the property for longer duration which can be fatal most of the times. As in the trading there should always be liquidity in the flow of money so try to sell your property as soon as you get good value for it.
b) Before selling always keep an eye on the current rate of the property in the market.
c) Try to sell your property to a genuine customer instead of a trader as he can offer you more value for your property.

Investments through real estate trading: Risk factors

As it is the golden rule of trading that larger the risks more will be the profit. But real estate trading is slightly a different affair, the risk factors are very few but earning potential is very high. Real estate trading most of the times gives you good profit if done carefully by keeping the above points in the mind. Still as I said that there are few risks involved so let's have a look on them also to become a complete real estate trader.

1. Deflation in the price of the property- This is the major risk involved in the real estate trading. So, it is always better to have a good look on the forecast of the market. It is always better to sell the property in the due time if it is forecasted that value of the same may decline in the future.

2. Wrong assessment of the negative cash flow- There is also a fair amount of risk that a trader wrongly assesses the negative cash flow that he spends in the buying or renovation of the property and doesn't include it in the base value of the property. This can also lead to the loss to the investors.

3. Improper documentation of the property – Sometimes, new traders fall in the trap of fraud real estate traders in the flipping process which ultimately leads to the loss of money and property both. So, always do proper research of the property dealer before making any financial deal with him.

4. Failing to do an insurance of the property- In the present scenario, insurance is the best method to keep you on the safer side. Most of the traders neglect this in order to save their money but sometimes it can result in heavy loss.

Insurance of the property gives you surety that you will get at least a fixed amount of some even in a financial loss. Also, you can include the cost of insurance in the negative cash flow and can include it in the base value of the property.

Conclusion- Above tips and risks if followed thoroughly then can provide you really huge profit in the real estate investment. You must not forget that investments through real estates trading is a mixture of smart calculations and a little amount luck. So, become masters of the smart calculations and little amount of luck will definitely follow you.

If you still have any query or doubt about investments through real estates trading, then please fill free to jot it down in your comments. I will be happy from the core of my heart to solve them with best of my knowledge.


Guest Author: Mihai03 Jun 2012

1) rent roll expenses2) tunevorr or vacancy rate3) location4) access5) future potential6) price vs value = is selling price below, at or above market value7) condition alternate use besides current use9) quality of tenants10) is current roll at market, below or above if so, why?

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