Real estate investment

Real Estate Investment – How to Best Position Yourself?

In support of real estate investing being an excellent decision, the fact that it is one of the most common investments also speaks to this. This type of investment of free capital is present both in our country and abroad, and it seems that the current real estate market is experiencing unprecedented expansion. Increased demand necessarily raises property prices as well, so now is the right time for this type of investment.

What should be paid attention to first

Investing or saving through investment in a purchase? Both of these answers are absolutely valid, and most importantly – profitable. Investing in real estate or a form of saving where you invest in purchasing real estate carries many advantages, and among the most important is that real estate is the “currency” most resistant to inflation. However, what should be taken into account?

As with any investment, the question of profitability arises. If, after weighing the pros and cons, you determine that investing in real estate is a profitable long-term solution for you, then there is no reason to change your mind. However, if you plan to purchase property through a loan for which you will need to pay monthly installments that should be covered by the monthly rent of the newly purchased apartment, it is wise to inquire thoroughly about all loan costs. While purchasing with cash is the ideal solution, this is often not the case, so buyers turn to solutions offered by banks. Hence, the calculation of the monthly loan installment along with all associated loan costs, on the one hand, and the monthly rent, on the other, are two factors that make a real estate investment (un)profitable.

Once the decision to invest in real estate has been made, in the case of buying an apartment (there will be more on what real estate entails later) to rent it out later, consider who the target group is, in fact – what kind of tenants do you want? Would you rather rent an apartment to a family or a couple, or do you want to rent it out to students? If you opt for the latter, it would be wise to buy an apartment in one of the university towns in Serbia, as this increases your chances of having tenants at all times. Also, consider whether you want to rent out a furnished or unfurnished apartment, because every investment in furnishings directly affects the growth of the monthly rent. For renting to students, furnishing is mandatory, as the vast majority of students who come to larger cities to study do not yet have any of their own furniture and are always looking for furnished apartments.

What types of real estate exist

When it comes to types of real estate, we will mention the three most common types of real estate in which investments are made, and these are: apartments, commercial spaces (by which we mean halls and warehouses), and arable land.

Real estate investment most often involves buying an apartment for rental or sale after renovation, but investing in the purchase of commercial space or land with a plan to find a tenant can also be a profitable solution. Regardless of the type of real estate we consider, the location where the property is situated is a major factor in demand, and thus in setting the rental price or sale price.

Regarding apartment rentals, be aware that smaller apartments are generally more in demand than larger ones. For example, if you want to rent an apartment to students, it's quite sufficient to choose an area of approximately 40 square meters for this purpose and invest money in furnishing it. This will result in lower costs than investing in a larger area, and if the apartment is vacant during the summer months when there's a break from university, the utility costs that you will pay will be lower (proportionally to the square meters).

The potential risk of investment unprofitability is always a present factor, which doesn't have to define the final outcome. What's important is to stick to the calculations you've put on paper and to track the flow of your invested money. The moment you assess that the investments will become unprofitable, react without waiting and hoping for a change that will happen on its own.

What is the current market situation?

The first half of 2023 began in the same vein as last year – due to political and economic turmoil, real estate prices are higher than in previous years, and almost everyone hopes for stabilization on this issue. The unstoppable rise in price per square meter in all parts of the country is accompanied by increased demand for real estate. Opinions on the cause of increased demand are divided – some believe it is caused by the increasing immigration of foreign citizens to Serbia, while others “blame” the global market situation for the higher prices. While awaiting the stabilization of all markets in our country, including the real estate market, we can still assert that investing in real estate is nevertheless an excellent way to preserve the value of your assets.

New construction or old construction – what is more profitable?

If we now focus solely on buying an apartment as a form of real estate investment, you will likely ask yourself the question: what is the better choice – to buy an apartment in a new building or an older building?

Old buildings don't necessarily mean an apartment requires a complete renovation or a costly adaptation. It's possible the seller invested in the apartment before selling it so that it doesn't require any investment. Likewise, if you estimate that renovation is necessary, pay attention to the approximate cost of renovation and whether it would be worth it for you. Precisely because new buildings do not require any form of renovation or repairs, apartments in new buildings are often in high demand for purchase.

Renting or reselling?

This dilemma can be included as the second question you'll likely ask yourself. Do you want to sell the property you're investing in, or rent it out? What seems like a better option to you?

The answer to these two questions depends on your plans. If your plan is to buy an apartment and rent it out (long-term or short-term), you probably have a general idea of the characteristics of both short-term and long-term rentals, and you are certainly familiar with both the good and the less good situations that can always occur if tenants are irresponsible and careless. You have probably heard stories (or have experienced such situations yourself) where tenants, due to irresponsible behavior, caused damage to the apartment that even the provided deposit could not cover; or that significant financial damage was caused to the landlord due to non-payment of obligations, etc. Of course, this is not a standard pattern of behavior for all tenants, and do not let this demotivate you from realizing your idea. If you want to rent out an apartment and generate passive income that way, inquire thoroughly about your rights and obligations as a landlord.

On the other hand, selling a purchased apartment with a room doesn't carry the worries about tenants' behavior in the space they live in. This is about (we can freely say) a somewhat more complicated process because the act of selling itself is more complex compared to renting. What complicates selling? A lot of paperwork and taxes are what people dislike the most. However, if you decide on this option, then our recommendation is that you definitely have expert support from a real estate agency in the sales process, which will greatly simplify all stages for you – from beginning to end, and which will be available to you for any consultation and assistance.

Is it the most popular and stable way of investing?

If we agree that investing in real estate is the most popular way to invest financial resources, do we also agree that it is the most stable way to invest? Is this type of investment capable of preserving the value of invested money the most and ensuring its return (either through sale or rental) at the moment the owner feels the need for it? Can the same property, if necessary, also be used for housing when the owner decides not to rent it out anymore?

Yes!

They believe this form of investing is very profitable, and for that reason, we believe this type of investment will remain relevant for a long time to come, due to all the benefits it brings.

How to invest in real estate wisely?

To ensure your funds are invested in the best possible way, we advise you to carefully consider every decision and write down all investments and expenses. When you do the math, you will know whether to choose to rent or sell the purchased property and how you can generate a higher return on investment. Once you make a decision, be sure to engage a real estate agency with enough knowledge and experience to make the process of selling or renting your property as easy as possible.