Steps To Ensure Long-Term ROI
One of the foremost reasons for investing in real estate, apart from using it for residential and commercial purposes, is to gain good returns on the investment—especially in the long run.
Here are the important steps to ensure long-term ROI on real estate:
- Calculate the ROI:
Whether you’re investing in stocks or real estate, keep in mind that the method to calculate the ROI on any type of investment is the same. To calculate the profit on any investment, take the total return on the investment and subtract the original cost of the investment. Keep in mind that ROI is a profitability ratio represented as a percentage amount.
2. ROI on real estate:
Real estate can generate returns in two ways—through rental income and capital appreciation. The investment return includes both the rent generated, as well as any price gains as the market value of the property increases. However, make sure to factor in all the costs of the investment that include the initial purchase price, property taxes, interest on loan, insurance, and maintenance.
3. Beware of misrepresented ROIs:
As an investor, keep in mind that ROIs can very easily be misrepresented. You will need to watch out for skewed representations in order to make the right investment decision. For example, if you hear that a person has earned 200% return upon selling their property, they are usually referring to the difference between the cost price and the selling price of the property. However, this is an oversimplified representation of ROI. One must factor in all the costs associated with the property purchase in order to correctly represent the ROI.
4. Determine the factors that assure lucrative ROI on real estate
There are a few known factors that can significantly boost the ROI prospects on your real estate purchase.
Here are some of them:
- The credibility of the builder:
Investing with a credible builder is a sure shot way of ensuring that the home appreciates in value, owing to the high demand.
- The location of the property:
A well-located property that offers access to a range of civic amenities always appreciates well.
- The type of property:
An apartment in a residential complex that is equipped with various amenities and conveniences will always stay in demand and will therefore offer handsome returns in terms of both rentals and resale value.
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