Different types of profiles value investing in real estate in the coming months. According to the latest BBVA Research report, home sales, although cumulative, have fallen by 21.6% due to the impact of the pandemic.
New trends such as build-to-rent, where construction-to-rent is committed, have encouraged investor appetite and are expected to take hold during 2021. From a prime investment point of view, a slight downward price correction is expected from 3%, but they remain stable investments.
Telecommuting and the great uncertainty in the markets will be what can influence the most when making investment decisions in real estate. What could happen next year? In general terms, both sales and the price could decrease, but a recovery is expected at the end of the year.
Invest in Real Estate
Acquiring a property is an investment alternative with a marked horizon in the long term. The impact of the pandemic has slightly transformed the different scenarios for investors, but experts agree that it remains profitable in general terms. It is also essential to consider that the health crisis’s influence has been different in all countries and markets.
Nor is it identical if we analyze different contexts such as residential, prime, office, hotel or vacation rental. There are various investment formulas for this type of property. We are going to analyze the three most important ones below:
Buy and sell
A safe way to protect our money is to buy and sell a property. Experts point out that it is the best tactic to grow our investments in a context of economic change. However, the main handicap is that a substantial investment of own capital or mortgage is required.
During the first months of this year, the contracted mortgages decreased due to the impact of the health crisis, although the conditions and rates in most cases have improved for those interested.
Another important issue at the time of buying and selling is that it requires considering the different terms between one transaction and another. Due to the current context of uncertainty, for many investors, it may imply a certain modesty.
Buying a property and then leasing it for different uses is another way to invest in real estate. In most cases, a monthly fee is established that the tenant must pay.
One of the exciting aspects of this formula is that with good quality and well-maintained properties in the medium term, it can mean better benefits each year. The consultants expect the build-to-rent to take hold in this model. Building to rent may be increasingly important in our country.
The luxury build-to-rent in cities like Madrid, Bilbao or Barcelona is increasingly attractive to investors. In luxury residential, this scheme is expected to stay as long as a good location and high-quality services are sought.
It is a new way of investing in real estate, established with the arrival of fintech. These new financial market operators raise funds from different investors through blockchain technology.
Among the different contributions, a real estate property is acquired and later rented to third parties. The exciting thing about this new way is that the initial amounts can be smaller than in the previous models, which allows a varied range of investment profiles to enter.
Why is it an excellent option to invest in real estate in the future?
Investment in real estate in Europe is solid, and in the first quarter of the year, it reached 85,500 million euros, a record. Although the current outlook is one of great uncertainty, experts believe that investing in real estate will continue to be a profitable and stable investment.
Regarding prices, as we have explained before, a slight decrease is expected in the first half of 2021, but it can be established again, especially at the end of the year. According to the Prime Global Forecast 2021 analysis, the differences are essential in the prime segment but are still enjoyable if we think from an international perspective.
Of the nine markets analyzed in this study, there will be a decrease in prices at the end of this year, but in 2021 it will emerge, forming three large groups of markets:
With low-interest rates and strong demand: where prices are expected to rise, such as in Madrid, London or Paris.
Where the pandemic has a slight impact: as is the case in cities such as Buenos Aires, Shanghai or Lisbon.
Markets where an evident growth in prices is expected: such as Los Angeles, Geneva or Miami
Steps to follow when investing in real estate
Like any other type of investment, investing in real estate is a complex decision. Experts recommend a series of steps or issues to consider when considering a strong investment, such as in properties. We see them below:
1. Have a clear objective:
As a first point, consider the reason for this investment compared to other possibilities. The utility the property will have for you and the amount it will mean for your cash flow is essential to assess.
2. Mark a long-term horizon:
The return on your investment must be oriented to the long term, and it can be a grave mistake to think otherwise. A property is a value that can increase over time. Still, it is also convenient to consider that the term to obtain profitability may be longer in uncertain contexts such as the current one.
3. Market study:
An essential step to analyzing the future of your investment is to analyze the market intensively. Considering the location, and the possible infrastructure developments that the area may experience, looking for information and documentation of a very different type, is the ideal to make a good decision.
4. Find the moment:
Suppose you are considering investing in offices, for example. In that case, it is interesting that you believe significant changes will occur in the design of offices. As for the more industrial segment, the impact of digitization in the coming years will be enormous. The state of alarm was a clear example of a change in consumer preferences that you must pay attention to in the coming months to make a good bet.