Why investing in property
with long-term agreements is beneficial
What to choose:
In this article we will analyse the benefits of various types of rental agreements and offer you advice about real estate investment, giving you an understanding of what property is currently the most promising.
In the commercial property market, lease agreements can be
If the investor believes that rental rates are going to rise over the following
As of 2017, prices in the EU and the US are already high, with there being no strong potential for growth, with it also being unlikely that mortgage rates will drop further. In such a market climate, we recommend that less experienced investors who want to keep their capital in real estate put such capital into projects
When investing in properties
What to invest in
In our opinion, investing in retirement homes, medical centres, warehouses and hotels shows the most promise today. They will not lose liquidity
Retirement homes and medical complexes will grow in demand as the population of developed countries continues to age, with life expectancy increasing. The rise in life expectancy will be boosted by advances in personal spending on new technologies related to medical services. According to UN forecasts, by 2050 over 40% of the population in advanced European countries will be over 60 years old.
Logistics parks will form the basis for online shopping. According to DHL estimates,
Lastly, hotels will remain liquid thanks to the fact that people will travel more frequently. According to estimates from the United Nations World Tourism Organization (UNWTO), the number of international tourist arrivals will be increasing annually by 3.3% on average up to 2030.
In our opinion, unlike the asset classes mentioned above, commercial property faces greater challenges that may decrease its liquidity.
As freight transport becomes cheaper, online sales will grow sharply. Such a growth is likely to be facilitated by doing away with manual labour and replacing it with autonomous machines and robots that fill and deliver orders. This will reduce cost and delivery times, thereby tipping the balance significantly towards electronic retailing. At the same time, the demand for conventional shops will decline.
How to invest
Although logistics and medical centres demonstrate potential, we recommend investing primarily in retirement homes and hotels with strict
As for clients with smaller budgets, we recommend buying separate rooms in retirement homes
When investing in retirement homes we recommend:
- selecting reliable markets: Austria, UK, Germany, USA or France, and in large
or medium-sizedcities and their suburbs with well-developedinfrastructures;
- selecting the right property
micro-location.The main question investors should be asking themselves is whether there will be many retiree tenants in the area in 10–30 years’time (during the rental agreement and after its expiration). This information can be obtained during the project audit;
- estimating the possibility of upside, in other words, the hypothetical possibility of expanding the room capacity and consequently increasing the revenue and capitalisation;
in new-buildsor renovated buildings that meet the tenants´requirements.
When investing in hotels we recommend:
- considering such investment vehicles as large hotels in popular locations;
in mini-hotelscautiously and selectively since they are often managed by minor operators, which may lead to their failure to fulfil revenue plan and rental agreement obligations;
- selecting hotels in large cities with big tourist flows, independent of seasonal demand;
- paying attention to the hotel condition, the time it was last renovated, its ratings and reviews on the internet, the tourist flow in the area where the hotel is located in the city, demand seasonality,
the hotel´scompetitive ability in the local market and the local infrastructure.
A property with
George Kachmazov, managing partner at Tranio
Originally published on globalrealestatexperts.com