The best investment, ideally posed, does not exist. What does exist is the best investment for you, tailored to your needs and with your rules. Learn to choose the best investment project.
Variables to decide on an investment project:
There are several investment opportunities that look perfect, but they may not fit your investment profile, your life expectancies or your own economic and vital dynamics.
For this reason, there are several factors that you must evaluate to choose what to invest your money in within an investment project. Which are grouped in two:
Quantitative variables: They are foreign to the investor, although not to the market, and tend to be indexes or numerical dimensions.
Qualitative variables: These are the ones that allow you to match your expectations and your possibilities with the investment project.
Although it is you who evaluates what you consider to be the best investment project, you will find in a good advisor the complement to find that necessary balance of these groups of variables in the best way.
Let’s analyze them:
There are many indicators for different aspects of real estate investments because the dynamics of its market mix several disciplines, such as statistics, economics, market studies, finance, valuation and urban planning, among others.
The quantitative variables that affect a real estate investment project can be:
- Indices or indicators, which are the result of academic studies and the design of regulated procedures of the different agents present throughout the real estate investment process.
- Average prices and other variables present in the areas of interest collected by those who are monitoring real estate activity. An average is a basic parameter of a group of data that shows the mean value, not the extremes, so it gives you an idea but not necessarily the reality of each property.
- Virtual search data and inventories in real time, among many other possibilities that are being developed through the appropriation of technology in this sector that seek to understand its dynamics.
Although this is a whole universe, we recommend paying attention to three quantitative variables that are very important if you are thinking of investing:
1. The price per square meter: it is an indicator that refers to the average price of an area and, as it varies over time, it depends on the dynamics of the market. It is used precisely to compare between different areas of a city and to know approximately the prices that you are going to find in it.
2. The Safeguard Value or “store of value”: it tells you about the ways in which the value of an asset behaves. It can behave as a medium of exchange or as a safeguard of value.
This is defined through the behaviour of that asset over time. Real estate behaves as value protectors, in the face of the weakening of assets such as exchange goods (coins and bills), they maintain a more stable value over time; and then the safeguard value is, ultimately, an important factor for the creation of the patrimony that is created through the investment.
3. Return on investment: is the ability of a specific investment to manifest itself in profitability in a defined time. This can be calculated if you have historical data, although it is also used with hypothetical values to evaluate the relationship between the real context and the impossibility of it. It also serves to define if an investment project is suitable for your investor profile since it allows you to contrast your expectations of profitability over time with the possibility that a specific investment project has to give it to you.
The quantitative variables will be decisive for you to realize if the numbers that you are expecting and those that you can invest in agree but, in themselves, they do not guarantee investing correctly. So you need to consider another group of variables.
Qualitative variables, as their name suggests, are related to the qualities of the possible business and those that you expect from the east. We recommend you keep two in mind:
1. Location according to the business you have in mind: all locations have a value and the generation of good profitability will depend on the quantitative indicators and your plans.
For example, if your plan is to rent it to families, the location preferences will be related to colleges or universities (according to age); if they are families without children, the proximity to work or places of socialization and entertainment will be more important; If they are foreigners, take into account the centers of cultural interest and mobility facilities.
In other words, having a clear plan and user (whether you are yourself or a tenant) and strategically articulating it to the location of the offer is key to your investment project.
- Buy an apartment: buy to rent an apartment or buy to live?
2. Accessibility: it is the second qualitative criterion that we recommend you consider. Accessibility is similar to the previous one, but it is different, since it implies integrating into your criteria the needs of services and different tasks that, depending on age and activities, are needed to perceive good quality, because housing is closely linked to the dynamics of the life.
For a person silence can be very important for their quality of life or their rest during vacation times, and they do not care so much about the transport times that they are needed to achieve it. While for a parent it may be more important to save travel time to share with the family.
So analyze the offer of different services near the property in which you plan to invest. Even if they do not have the best quantitative indicators, it may be the best investment project in the long term for you.