Numerous factors help determine if investing in real estate is right for you. Real estate is a complex and private sector. Some pros and cons related to an investor’s long-term success in the real estate industry. It is crucial to be aware of the risks in real estate and optimize when you are about to make a decision. 

 

You need to evaluate the performance analysis of the real estate market and calculate whether or not real estate investment is a smart decision. Real estate attracts new developers or investors as the land generally has the potential to increase in value. Moreover, your returns are guaranteed overtime. The scale and size of the real estate market make a lucrative and appealing sector for current or new investors. Reports reveal that a significant portion of the lion’s share of wealth is acquired through real estate investment. However, some factors affect real estates such as potential return on investment, housing prices and the optimal rental strategy. Here are the most important things to consider when investing in real estate.

The economy

The economy and real estate have a mutual relationship, as the value of the real estate market corresponds to the overall health of the economy. This is measured by economic indicators such as the price of goods, employment data, GDP and manufacturing activity. There is a real estate downturn when the economy is sluggish. Additionally, an increased job market will have an impact if the housing market will grow due to the availability of money for homebuyers to purchase the property. Property investors should consider projected job growth and the employment rate when investing in real estate. You should know and be aware of the real estate susceptibility to the economic cycle as this can have differing effects on different types of real estate.

 

Interest rates 

It is key to research the interest rates before considering to acquire a property with a mortgage. Purchasing a residential property is considerably influenced by the changes in interest rates. when the interest rates decrease it, therefore, increases the housing prices due to an increased demand for real estate. This lowers the cost to obtain a mortgage to purchase a home. It is key to note that if the interest rates increase the cost to obtain a mortgage rises, thus lowering the housing prices and demand for real estate. The current real estate debate in Kenya if done away with as recommended by President Uhuru Kenyatta in the Finance bill 2019, it will have a significant effect on the real estate market in respect of mortgages. This will allow banks to adjust their rates as per market intensity.  Depending on how the market performs this will have a positive or negative impact. 

 

Supply of homes

Property investors should be keen in understanding the supply and demand in real estate. This determines if a real estate market is a buyer’s or a seller’s market. Rental property prices rise with a shortage of supply of homes and vice versa. It is crucial to know as this determines an investor’s decision whether to be a buyer or a seller. As an investor, it is advisable to watch out for future constructions and infrastructure development. This will help you determine how to achieve your strategic goals with the developing rental market in your neighbourhood. It is essential to ensure that the supply of housing will be able to keep up with the increasing demand. It is wise to remember that most homeowners consider affordability when it comes to buying properties. 

 

Government policies

Government policy is another factor to consider as legislation can have a huge impact on property prices and demand. The government can increase the demand for real estate with different measures such as tax deductions, credits and subsidies in the real estate sector. It is wise to be aware and knowledgeable about the current government incentives which can help you determine the changes in supply and demand of the real estate market. Already the government in Kenya has commenced on providing housing through the affordable housing programme. This targets lower-income earners who account for the largest share of demand as homeownership in urban areas such as Nairobi which is an increasingly rental driven market is affected by the high prices. 

 

 

Owning a property is the best way to make wealth, as real estate can help diversify your portfolio. It is important to invest in the right real estate market. This will help you make the right investment decisions either short-term or long-term based in future. Understanding the key factors that drive the real estate market is essential to succeed when investing in real estate. Real estate investment can be very rewarding.