It’s common for investors to focus primarily on profitability when it comes to real estate investments. However, it’s important not to stop at that point and to thoroughly analyze the investment opportunity, paying attention to other aspects that, in addition to impacting profitability, are crucial for successful investments.
Before starting to invest, it’s important to plan our investment strategy. In this strategy, we need to define aspects such as how much money we’re going to allocate for investment, what objectives we aim to achieve with our investments, and the timeframe within which we want to achieve them. Having a well-defined investment strategy will help us make the right decisions regarding our investments and achieve our goals. Once we have a clear strategy, we should pay special attention to certain aspects when analyzing a project.
1. Timeframe for investment recovery
This timeframe can vary greatly from one project to another, so it’s essential to have a clear idea, as part of our strategy, of how long we expect to recover our investment. In the case of long-term investment horizons, it’s important to consider that, in general, the longer we keep our capital invested, the higher the potential profitability. It’s important to note that these timeframes are estimates that can be extended or shortened, so it’s always advisable to add extra months to account for potential unforeseen circumstances.
2. Type of project invested in
The type of project often defines us as investors. In Urbanitae, we work with four types of projects: capital appreciation, rental income, loans, and developer loans. It’s recommended to diversify your portfolio by including various project types. For example, you can invest in a capital appreciation project and a rental income project to receive quarterly dividends while waiting for the final capital appreciation profitability.
3. Risk assumed in the investment
Risk is another crucial factor in determining whether a project aligns with our investment strategy. In essence, we should not take on high risk if we need the money in the near future. To analyze the risk associated with a project, we should be aware of details such as the percentage of pre-sales in the case of capital appreciation projects or the contracts associated with the commercial property in rental income projects. In each project published on our platform, we provide a section on risks, detailing them so that each investor can conduct their own analysis.
4. Platform through which you invest
It’s essential that the platform through which you invest operates in a secure and supervised environment, ensuring a safe investment. Additionally, they should provide all the information associated with the project so that each investor can conduct their own analysis and subsequently track the projects in which they’ve invested their capital.
5. Expected return on investment
Last but not least, profitability is closely related to all the previous aspects. At this point, it’s important to remember the objectives we aim to achieve with our investments. Projects with high returns are very attractive, but, as mentioned earlier, this directly influences factors like the risk assumed, which generally increases. Currently, the average annual return on investments in Urbanitae is over 16%, nearly double that of investments in publicly traded markets, such as the stock market, which currently has an average annual return of 8.4% this year.
In conclusion, there are many key factors to consider when investing in real estate, but undoubtedly, the investment strategy we design is what will help us make decisions and achieve our objectives, ensuring the success of our investments.
