Property Investment - Handling Market Volatility

Property investment market involves investors putting their money in real estate, in hopes that it's value will increase and they will be able to gain profit. They can invest in residential homes, commercial buildings, office buildings and other privately owned structures. In a bad economy, however, property investment market can prove to be volatile. There are several things investors can do to make sure that their investments will survive tumultuous times, and perhaps even bring profit.

Research Property Investments

Every investment inherently holds risk. Investors bought property in places where real estate was relatively inexpensive - working class neighborhoods, poor neighborhoods, sparsely populated areas, former industrial districts, etc. These investors either built new housing or refurbished existing buildings. They were willing to put up with low initial profits, higher-than-average crime rates, lack of retail, sporadic amenities and other factors that usually deter investors in hopes that property in the area would appreciate.

When the real estate market experiences a downturn, property investors need to be more careful about where they invest. They must be willing to research where the property they want to invest in is located. Some of the factors they may want to consider include:

  • Demographics - with special emphasis on economic factors such as the neighborhood's median and per capita income averages.
  • Economic conditions - the state of the community's commercial areas and businesses in general.
  • Availability of services - this includes police stations, fire stations, medical facilities, schools and parks. The investors need to know  how many of each are in the neighborhood and how close are they to the property.
  • Crime rates - both in the immediate vicinity of the house, and the neighborhood in general. For best results, investors should check both the actual number of crimes and a number of crimes per capita.
  • Commuter accessibility -  this can include both public transit options and decent road access.
  • Condition of the property - includes exteriors, interiors and any built-in appliances. Investors should also check the home's age - if it's more then fifty years old and reasonably well maintained, they have a better chance of making money on the long run.
  • State of the surrounding housing - how many foreclosures and vacant buildings are within a block of the property and in the neighborhood in general. Investors should also look at the appearance of the houses - even if people still live in them, the owners may not have the means (or desire) to keep them in good shape.
  • Environmental contamination - this includes waste from factories, larger-then-average air pollution, presence of hazardous materials such as asbestos and led paint

Optimize the Existing Property

In the wake of a bad economy, many property investors found themselves stuck with homes that they could not sell. With this problem, instead of leaving properties vacant, an investor should find a way to rent the property out.

However, before putting a property up for rent, investors should consider repairs to the property and tenant issues. Investors should weigh the profit they hope to generate, against the cost of repairs and upkeep. Investors can also spend some of their money in making the property more attractive to potential buyers.

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