A very well planned, strategically placed and well – developed investment in a Property may result in an investment of low risk.
One reason that high net worth individuals (HNWI) often invest in real estate properties, is to capitalize assets as part of their portfolio, so as to increase their assets’ value either short-term or long-term.
Therefore, the decision of selecting the right property is of upmost importance and several factors must be taken into consideration before proceeding with the investment.
- Location is one of the most significant factors that investors should take into account. Investors should make a thorough research regarding the location of the property / land plot before proceeding with their investment plan. Location’s importance arises from the fact that location increases the value of the land plot / property unit through time and cannot be changed. Therefore, a professional assistance is highly recommended in order for a thorough research to be conducted and ensure that the location is in an area with historical background of increasing value. Additionally, during the inspection of the location, the investors should take into consideration other aspects as well, such as the tenancy demand, the jurisdiction’s characteristics where the property is located, the stability of the economy and its healthy growth, lifestyle, infrastructure, surrounding area for easy access to supermarkets, banks, schools etc.
- The purpose of the investment / goal is another important factor that investors should determine before proceeding, for example, will the property be rented or will the property be used by the investor, is the property going to be bought for reselling after a short period of time or for renting it short-term / long-term and sell it afterwards. All the above-mentioned factors are very important, since they determine the strategies to be followed for the financial property investment.
For instance, if the purpose is to sell it a short period of time after the purchase is made, with an approximate estimated percentage of capital appreciation, a good advice would be to select an off-plan luxury project, in a prime location, in a stable economy and in an upgrading country. Following this strategy, will earn you capital appreciation during the construction of the property. In addition, if you decide not to sell it immediately, you can rent it and start earning high return on investment.
- The tax system of the jurisdiction in which the property is located is another important factor that investors should take into consideration during the property assessment. A favourable jurisdiction with relative reasonable property taxes is important, since the retention cost of the asset should always be with a positive sign. For example, the Cyprus jurisdiction is considered to be very tax favorable jurisdiction due to the fact that the municipality and community taxes are approximately up to 1% – 2% based on the Land Registry’s assessment of the 2013 property value, there is no VAT on the resale of a property (subject to conditions), the VAT on owner’s first property is 5% (subject to conditions) etc.
- Moreover, it is important for the investor to be adequately informed about the fixtures and fittings included in the property. Being the investor, is vital to know the quality of the materials (structure and walls, external and internal building finishes, installations, security etc), since these very essential parts will add value to the unit. Moreover, the design of the property is important since it will define its lifetime and demand. The appealing look of the property, its security along with all the above-mentioned factors are essential components that will add value to the property’s selling or leasing price.
- Additionally, investors should always have an exit strategy that will provide the liquidation of the investment any time, relatively easy. A good exit strategy may be the selection of a property that will address the local, as well as the international market.
Taking everything into account, all the aforementioned factors are important aspects that investors should look into prior to proceeding with their financial investment. We highly recommend that investors should always consult reputable developers and law firms, which through extensive research, will provide the best possible real estate options in the selected jurisdiction and safeguard the general target of every investment; increase its value and minimize the risk.