Now is probably the best time to buy real estate and the reasons are all due to trade wars between the United States and a few of their trading partners. The reason for this is due to the effect of Trade Tariffs.
The start of 2019 looked set for world-wide economic growth, but Donald Trump (POTUS) took the far reaching step to apply trade tariffs of 25-50% on goods from US trading partners with Canada, China the EU and Mexico. With imported goods costing more, the liquidity of personal budgets will also be less, and the IMF has (for the first time ever), lowered the mid-year (2019) growth forecast from 3.9% to 3.7%.
The knock on effect with global real estate and property markets around the world should be gearing up for a bit of a negative economic slump. Last year GM urged Trump not to raise steel and aluminium tariffs, and the resultant effect has been the loss of 14,000 jobs. The implication is that there will be less disposable income. History shows that when there is less money to spend the house price market takes a massive hit.
Why Portugal Real Estate a Good Investment Option
Let’s take a look at why Price Waterhouse Coopers has crowned Lisbon, Portugal as the Real Estate Investment Capital of Europe for 2019. The Portuguese economy fuelled by increased tourism and lower market prices created an uptake of cheaper priced condos in the city centre where $167,000 will get you a 600 sq. Foot apartment; in other areas of Portugal, the prices are even lower.
Although rental yields in Portugal range between 5.4 to 6.7%, which is still lower than other countries, it is much higher than the rental yields in Asia: Singapore 2.5%, Hong Kong, Japan, and Taiwan around 2%.
Further afield in the Asia Pacific region, Brisbane, Adelaide, and Hobart (Tasmania) show rental yields of 5.5%, but other Australian cities like Canberra and Darwin are still hovering around 6%.
What are Best Ways to Earn Money from Real Estate Investment?
There are many ways to invest in real estate, and it doesn’t always cost too much. Based on what we know about the property market, investment earnings in real estate come from rental income, not property appreciation.
So what are the best ways to get an income from real estate?
Rent Out Your Home
This takes more planning than you would imagine and one of the best ways would be to buy a multi-family home, where you get income from the other units, which will cover mortgage payments, and could even make your own monthly rental free. To achieve this, you would have to qualify for a housing mortgage and make a cash down payment of the minimum amount, which varies in every country around the world.
Buy to Rent a New Build/Turnkey Property
As the name suggests, buying a turnkey rental property means that the property is ready for a renter to move straight in. Often these are new build, but sometimes they are old properties bought by a developer, and this is where the problems usually arise; scurrilous builders cut corners, leaving the new owner/investor with the issues of full repair and maintenance down the line. Remember, that if there are significant refurbishments when you have a rental property, it can mean a loss of income during repair work.
Advice for all turnkey investors is to do plenty of homework and make sure that every part of the build has a certificate from government regulators.
One of the advantages of a new build turnkey property is that the developers often have a relationship with mortgage brokers, whereby they offer reduced deposits and in some cases, waive the mortgage deposit for first time buyers. However, this is where you have to read the contract “fine print” - if you are a first time buyer, the contract may specify that you actually live in the unit and therefore cannot rent it out.
Real Estate Partnership
There are two ways for investors to “partner” with others - as a lender or equity investor. If you have money to invest and simply want to get into the property investment as a form of passive income earning, then you should find a professional real estate expert who is looking for investors to fund deals.
Once again, there are two kinds of property investment, and there are differences in the risks and rewards.
House flipping offers investors a quicker return on investment provided there is a “sellers-market”: the investor will form a partnership, buy a house and flip it as soon as possible and split the profits from the sale.
The second form of partnership and probably more lucrative is to invest in a project whereby you put money in to convert a property from a single dwelling to multi housing and take a share of the rental income. This means finding reputable builders and renovators who are looking for funding.
Crowdfunding for real estate is where a group of investors can advertise online to other accredited investors and put together a fund to buy property (or properties) and share the profits. In the United States, the SEC (Securities & Exchange Commission) has set out the rules, which limit the partnership to accredited investors.
REITs – Real Estate Investment Trusts
REITs also fall into two categories- they are either Mortgage or Equity Real Estate Investment Trusts. Typically, REITs are for large commercial or apartment properties, and the advantages for investors are many.
The question asked by investors: Buy to live/rent vs. buying into a real estate investment trust
The bottom line is always can you buy for cash or do you have to jump through hoops and find a mortgage. The question investors ask themselves is "are they going to be good at running rental properties," or should they invest in something that takes the day to day property management out of the equation.
What is REIT – Real Estate Investment Trust?
REIT is similar to mutual funds: Individual investors buy shares in REITS, which may be for a single or group of properties, with the goal of attaining rental income and a financial appreciation of the initial investment.
Why REIT is Good for Investors – Beginners Guide for 2019
REIT markets have been developing steadily in Asia since the early 2000s, and in Japan, there are now 17 JREITs registered on the Tokyo and Osaka exchanges, with more than two trillion Yen capitalisation. Investors around the Pacific Rim in countries like Singapore, Australia, and Hong Kong have turned to REITs as one of the most lucrative forms of investment for long -term growth potential.
Find out how Real Estate Exchange Traded Funds (ETFs) work in different international countries.
To Summarise the Property Investment Market
Property as an investment is always a challenging sector to gauge for average people. Traditionally the capital required to get into the property market has always been a deterrent for individuals. Taking on property management is not suited to everyone, and the capital gains can often be lower than the amount spent on administration and rental collections.
However, if you are one of those people to whom this form of investment is not a chore, 2019 will be a year to invest in areas where the property prices are low, and it is a buyers’ market. The interest rates are low in many regions around the globe, and so are the property prices. Fiat currency will be at a premium in coming months due to trade wars between the United States and other countries, and the European property sector looks suitable for investment, especially in countries like Portugal.
During periods where interest rates are low, REITs offer an attractive, low-cost option for investors to increase their financial and retirement portfolios with assets in real estate. If the investor chooses an ETF, which holds a basket of traded securities that also includes real estate assets, there is the option for more diversification by having a bigger group of assets, thereby mitigating the investor’s exposure.
REIT also offers investors the chance to invest in real estate without becoming a landlord/property owner or partner in a traditional real estate company.
REITs combine the liquidity of stocks with the income and stability of owning real estate. International REITs bring more investment opportunities, but the investor must be careful to choose a company that has not only a broad base of REIT offerings, that it also has a good standing on the international stock market s and shows transparent management principles, with a reputable operations team.
Investors who are not interested in property management per se’; they do not want the hassle of rent collections, repairs and maintenance and capital tied into a single building, then REIT is one of the most attractive, lucrative and sustainable investment tools for any portfolio.
Property Investment in 2019 is definitely one of the most critical factors influencing retirement and financial portfolios. There are more regulated ways to get into property investment, and this is good for both beginners and experts. The final piece of advice is to do plenty of research before spending any of your hard-earned savings, but there is a caveat: do not leave it too late to make the more to property investment.