Generating income from construction projects is one of the most attractive types of investment. However, there is an opinion that this type of business requires significant financial investments. How can you achieve success by investing in real estate? Let’s look in more detail at ways to make money on your “square meters”.
Source: Freepik
Buying an Apartment in a New Building and Resale It at the Final Stages of Construction
The stage of the very beginning of construction of a building is called off-plan. Profitability ranges from 15% to 40% per annum, based on price increases between the start and end of sales. But you need to be very careful when choosing an object. When the real estate market grows, earnings also increase, but in times of recession, it is possible to lose in price. However, there are also exceptional projects that avoid recessions.
Buying an Apartment for Rent
It is one of the most popular types of investment and a low-risk real estate investment strategy. It doesn’t matter whether you buy an apartment, as the main thing is that it must be renovated and have everything necessary for life; otherwise, you should invest additionally in the arrangement. The location of the property is essential:
- Proximity to metro;
- Social infrastructure (for long-term rentals);
- Tourist attractions (for daily rentals).
You can use your capital or purchase an apartment with a mortgage. Currently, the average yield from renting out real estate in Cyprus fluctuates around 5-8% per annum.
Resale After Renovation
A simple way to increase the value of an object. An investor buys a cheap, worn-out property on the secondary market and makes repairs, thereby increasing the asset’s market value. Even a simple, clean finish will add value to the room, not to mention a full-scale renovation. The profitability of such a strategy reaches 10–20%, and the specific figure depends on the amount of investment and the scale of repairs. For those who choose this strategy, it is advisable to look for housing in an area popular among buyers and where the cost will be lower than the average for the region. The proximity of transport hubs and civil infrastructure is vital. Otherwise, it will not be possible to return the investment quickly.
Buying Real Estate at Auction
Bidding is a process when the property is sold by:
- bankrupt individuals and organizations;
- debtors on the initiative of the executive service to pay off their debts to borrowers or the state;
- state and city bodies to replenish the budget.
The winnings can be very significant if you have some knowledge, time, and funds. An investor can almost immediately put up a property purchased in this way for sale at the regular market price. It is also possible to earn even more by independently upgrading the property’s class. Depending on the object’s condition, profit can range from 10% to 200% per annum.
Source: Freepik
Sublease of Commercial Real Estate
We are talking about renting an entire floor and dividing it into small sections of 30-50 m2. Thus, by renting out individual premises, you can make money on the difference in rental price per square meter. The main thing is that the long-term lease agreement stipulates the tenant’s right to sublease.
Purchase of Any Premises Suitable for Storage
Purchasing such properties can be profitable if they are located in cities with high population density. The simplest basement can become a profitable investment. The most valuable premises have a porch with a staircase and access to a busy street. The yield from leasing warehouse space reaches 20-40% per annum.
Purchase of Commercial Premises on the First Floors of New Buildings
One of the most popular real estate investment strategies is street retail. On the first floors of new buildings, you can buy not only residential but also commercial properties. By purchasing premises at the most profitable access points, an investor can earn big since the rental price can be several times higher than other properties in the area. The most profitable premises are usually situated in large residential complexes. The strategy is as follows: purchasing commercial premises at the off-plan stage and concluding an agreement with the future tenant. The rental business can be subsequently sold to another investor.
Purchasing Large Plots of Land
We are talking about purchasing very large land areas, since the investor benefits in price per square meter. You can purchase an inexpensive plot of land at auction or find a suitable option through a real estate agency. This real estate investment strategy is based on the development of the purchased territory. For example, a plot of land is divided into numerous smaller cottage plots, to which all communications are connected, and a road is laid between them. Thus, the cost of each individual object increases. Such financial strategies can bring up to 20-30% yearly profit.
Arrangement of Hostels and Hotels
This investment property strategy is similar to the division of large areas and rental of small objects, but we are talking about the tourism sector. The premises (the whole building or one floor) can be rented or purchased. They can contain a hotel, mini-hotel, or hostel. For example, over the past 5 years, the price of real estate in Cyprus has increased by about 30%. Nevertheless, the rental market is thriving, and the growth in rental rates over the same period has exceeded 50%. A potential investor should carefully read the Cyprus legislation on short-term rentals, which provides for many restrictions. Don’t forget to arrange the room to make the idea functional.
Source: Freepik
We have reviewed different types of real estate investing strategies. All of them are potentially profitable. You should also understand that investing in housing, like any other type of investment, has many nuances, and when planning a business, you should keep in mind its dangerous aspects.
Risks of Real Estate Investment
Your business may be in danger due to the following factors:
- incorrect cost estimation;
- Inappropriate location;
- negligent tenants;
- delay in delivery of the project or freezing of construction;
- unforeseen situations (man-made accidents, flooding, fires);
- fraud;
- changes in market prices.
Do you want to invest in real estate? Study different real estate investment strategies to choose the best option for you. It is important to carefully approach the selection of an investment object, check it for legal “purity,” and correctly assess market trends. If you do, you will succeed!
