Since the beginning of 2014 There has been a significant increase in private investment in real estate. The political and economic situation in Russia has forced citizens who want to at least preserve their savings to transfer them from bank deposits to apartments on the primary housing market and retail premises (street retail). Everything returns to normal.

Photo: Depositphotos/Deklofenak

It seems that the old rule of the Russian non-professional investor has worked: “In any unclear situation, invest money in real estate.” As the head of the new buildings department of the MIC Group of Companies Alexander Engel says: “For the majority of our citizens, investing money in square meters is a more understandable and less risky matter compared to the securities market, bank deposits and the precious metals market.” And as a guide, as Vladimir Bogdanyuk, head of the analytical and consulting center Est-a-Tet, notes, previous crises serve as a guide: real estate prices then quickly recovered, and their growth continued at least within the limits of inflation. Therefore, the share of investment apartments in housing construction projects on the primary market has increased. According to the head of the analytical center of the OPIN company Denis Bobkov, the share of investment purchases in the spring amounted to a record 30% against the traditional 10%.

But to be a successful investor, you need to know the rules of the market game. In addition, when sitting down at a card table, it’s a good idea to have more chips. The higher the cost of admission to the private investor club (investment volume), the more options available. And the effectiveness of investments depends on this.

Private Investors Club

Detailed socio-demographic characteristics of private investors are not that important. In short, these are citizens investing in real estate from 2 million to 50 million rubles. “These are wealthy people who have housing and available funds and who invest money in real estate with the expectation of making money on resale or receiving a stable rental income. Most often, they have the entire amount necessary for the purchase, and less often they get the missing funds through a mortgage,” - Denis Bobkov paints a portrait of a private investor. And there are 80% of such investors among investors operating in the real estate market.

The most understandable and accessible for them is the mass housing market. “The cost per square meter here is not as high as, for example, in the segment of commercial real estate or luxury and business-class residential properties. At the same time, there is always a demand for such goods,” says Alexander Engel.

If we talk about commercial real estate, the street retail segment has been the leader in private investment for several years now. They are also investing in small office blocks. Since commercial real estate prices have been rising at the rate of inflation in recent years, investors are presumably counting on rental income rather than speculative sales. According to estimates by Denis Sokolov, head of the Cushman & Wakefield research department, in the first half of the year 10-15% of all investments from private investors were spent on the purchase of small offices or blocks in office buildings in Moscow, the rest went to street retail.

Investment leader

After the crisis of 2008 and high-profile stories with defrauded shareholders, players in the real estate market were wary of buying an apartment during the construction stage. But now most investors are grazing on the market of new buildings. “Serious work has been done at the legislative level,” explains Alexander Engel. “Today, most developers work within the framework of Federal Law-214, which maximally protects the interests of shareholders.” The main increase in the value of real estate in the primary market is due to an increase in the stage of construction readiness of the facility; overall market growth, as a rule, does not exceed the inflation rate.

There is the highest demand for new economy and comfort class buildings in the old borders of Moscow, and the fastest turnover of money is also here. According to the general director of Metrium Group, Maria Litinetskaya, an investor purchasing such apartments can count on the standard profitability for new buildings in the capital: over the entire construction period (about 1.5-2 years), the cost per square meter increases by an average of 30%.

“The most advantageous offer is presented at the initial stage of construction, when the project has minimum prices. The high risks of purchasing at the initial stage of construction are compensated by the maximum profitability, which in some cases can reach 50%,” notes Vladimir Bogdanyuk.

According to him, most investors in the primary market sell their properties before receiving ownership rights, when the price has exhausted all opportunities for growth and the project will soon be handed over to the state commission in order to avoid additional costs for paying taxes.

Experts note interest in a new, but already proven successful format of apartments in Moscow. On average, prices per square meters in apartments are 15-20% lower than in apartments, so prices rise significantly as construction progresses.

It must be said that renting out an apartment is an unprofitable business model for a private investor. According to the Miel company, the average profitability of an apartment in a new building of economy and comfort class under the rental scheme today is 4-7% per annum with an average payback period of 18-22 years. The profitability of apartments is higher: 9-12% with a payback period of 11-13 years. But this formula does not take into account possible downtime of housing and utility bills. The profitability of housing can be increased if you register an individual business and switch to a simplified taxation system (income tax for individuals when renting out an apartment is 13%, and for individual entrepreneurs - 6%).

And others

In 2013 A new niche has formed in the market: private investors with amounts ranging from 1 million to 10 million dollars began to purchase Moscow offices in blocks. Before this, the traditional area of ​​investment in commercial real estate for private individuals was retail outlets. This has nothing to do with the current political turbulence, just a way of putting eggs in different baskets.

According to the general director of the company "Miel - Commercial Real Estate" Alexander Bolotov, the most attractive prospects for investing in commercial real estate open up starting from the amount of 800 thousand dollars. But the threshold for entering this market is lower: 250-350 thousand dollars. For this money it is possible to purchase either a small office block in a business center, or a retail space.

“Street retail on the ground floor of a building brings a stable income of 11-12% per annum, but this applies only to the most liquid objects located on the main shopping streets of the center or in walkable places in residential areas,” says Bolotov. “The profitability of the office segment is lower - 8-9% per annum. But the choice of small premises in high-quality business centers today, in contrast to the situation two or three years ago, is much wider. Within $380 thousand you can purchase an office space measuring 100 sq. m in a business center with good location. In the retail segment, for the same amount you can only buy a room with an area of ​​50 sq. m."

Comparison of investment instruments

The Russian economy has come a long way since emerging from the global financial crisis of 2008-2009. Renaissance Capital looked at how the main investment instruments available to the average resident of our country behaved in the post-crisis period.

Comparative returns of investment instruments for 2010-2013. Investment instruments income for 2010 income for 2011 INCOME FOR 2012 INCOME FOR 2013 INCOME FOR FOUR YEARS Real estate in rubles, including rent (5% per year) and personal income tax 15,8% 18,2% 7,6% 10,1% 69,2% 8,5% 5,6% 7,5% 8,5% 33,6% 1,3% 4,6% -2,7% 11,8% 30,4% Mutual funds (including personal income tax) 25,2% -21,9% 7,5% 11,3% 17,0% Gold (including personal income tax and conversion) 18,2% 12,3% -8,1% -27,0% 5,2% Inflation 8,8% 6,1% 6,6% 6,5% 31,1% US dollar to ruble 0,5% 4,2% -3,2% 11,8% 13,3% MICEX Index 23,2% 16,9% 5,2% 2,0% 9,9% How did they think? Real estate in rubles, including rent and personal income tax- in the calculation, data from the site irn.ru about the Housing Cost Index were used: the calculation was made taking into account the dynamics of the US dollar exchange rate, income from renting out real estate at a rate of 5% per year and excluding personal income tax. To calculate profitability for four years, personal income tax was taken into account only for rental payments. Weighted average rates on ruble deposits- average values ​​for January of each analyzed year; taken from the “Bulletin of Banking Statistics” of the Bank of Russia for deposits in rubles for a period of more than one year. Ruble yield on dollar deposits taking into account conversion- weighted average rates of dollar deposits for a period of more than one year are taken from the “Bulletin of Banking Statistics” of the Bank of Russia. They are then adjusted taking into account the dynamics of the US dollar/ruble exchange rate and the conversion cost, taken as 4%. To calculate the four-year return, conversion costs were taken into account once rather than every year. Mutual funds- in the calculation, data from the site investfunds.ru were used: for each analyzed year, five open mutual funds were taken, which are leaders in terms of the volume of funds raised based on the results of the year preceding the analyzed one. These funds focus on either stocks or bonds or both. For the selected mutual funds, the weighted average income for the year was calculated, taking into account personal income tax. Gold- the calculation was made according to data from the Bank of Russia, website cbr.ru, taking into account personal income tax and conversion costs, for which the Sberbank compulsory health insurance benchmark was used: the price spread between sales and purchases as of the date of this study was 5.8%. To calculate the four-year return, conversion costs were taken into account once rather than every year. Inflation- according to Rosstat. MICEX Index- according to the Moscow Exchange. US dollar to ruble- calculated according to the Bank of Russia as the ratio of the average exchange rate for January to the average exchange rate for the same month of the previous year.

I wish I knew the purchase

The most important and painful risk of purchasing primary housing for any purpose, as follows from a survey of experts conducted by the editors of RBC Real Estate, is long-term construction that turns into unfinished construction. There is also a risk of not recouping your investment due to the lack of price growth for the project, difficulties in finding buyers and the associated need to provide a discount for the project.

But all these risks can be minimized or completely eliminated. Firstly, you need to carefully check all title documentation for the project, the financial condition of the developer company and the portfolio of projects it has implemented. Alena Deryabina from Don-Stroy Invest also advises paying attention to the behavior of the developer: “The developer’s readiness to organize hasty “sales” at the first signs of a decline in consumer activity most likely means that he does not have his own funds or serious financial partners and requires a sharp increase in incoming "

Secondly, when choosing a project for investment, be guided not only by the most affordable price, but also take into account the entire set of qualitative characteristics of the project, as well as the competitive environment, in order to correctly assess its liquidity and prospects for further resale. The new building should be located in areas of Moscow or cities in the near Moscow region that are in demand among buyers; good transport accessibility of the property is also desirable. For investment purposes, it is best to purchase one-room apartments and studio apartments, which are always in demand.

According to Anton Gololobov, marketing director of Villagio Estate, purchasing real estate in a low-rise complex outside the Moscow Ring Road can also bring good returns (up to 10-12% per annum). “A couple of years ago, one investor purchased several townhouses in our premium village at the start of the project. Now that the houses have been put into operation, their value has increased by 25%. The investor plans to invest in finishing the townhouses, which will add another 15-20% to their price.” .

The investment window is closing

Now the number of investment sales has decreased compared to the first quarter of the year. But people making money from the rising cost of a square meter did not leave the market. The crisis state of the economy is pushing them to actively invest their available funds in real estate. According to the head of the analytical center of the Domus Finance company, Alexandra Biryukova, investment transactions should now be aimed at preserving savings, and not at significantly increasing them. Still, it won’t be possible to increase it much. The expert calls an effective private investment the acquisition of the “right object” with a subsequent significant increase in its prices over the selected period and the successful sale of the object. Of course, if the investor’s goal is to sell the property as quickly as possible, then a temporary drop in demand, which may occur in the wake of the crisis, will make it difficult to achieve this goal, but is unlikely to affect the price of the property.

It is still difficult to predict how much and when the market will decline - there is too much uncertainty in it. But everyone is confident that demand and prices for housing and commercial real estate will begin to fall. According to experts, the investment “window” is closing and the pre-crisis rescue of private capital through real estate may soon end. However, one of the lessons of the 2008 crisis. is that the crisis also opens up new opportunities. Then, amid a rapid economic recovery, many succeeded by purchasing real estate and other assets in a growing market. Now it would be good to understand where his “bottom” is. As investors say: “Cash is king!”

Sergey Velesevich

How can a private investor make money on housing and commercial real estate?

A private investor can make money by investing in three segments of real estate: housing, offices and retail premises. However, when choosing the cheapest option out of the three, for example, buying an apartment, you need to be prepared for low returns.

The minimum cost of an apartment in Moscow is about 6 million rubles - in this case you can count on a one-room apartment in residential areas of Moscow. This is the minimum amount for investment. According to experts, one-room apartments, even on the outskirts of the city, are quite a suitable option for renting out. However, the most traditional scheme is to purchase an apartment in a new building at the foundation pit stage. In this case, the initial amount will be even less, and the final profitability will be about 25% - the cost of the apartment will increase as the house is built. True, such a profit can be obtained in two years - the time of building a house.

To make money on commercial real estate, you need to have a larger amount. For example,

The minimum amount for investing in offices is 8 - 10 million rubles.

“True, in this case, only a small part of the space in the business center will be available to the investor, which is fraught with a conflict of interests with other owners, and may lead to additional management and operation costs or even result in the need to sell the share. To minimize these risks, it is worth buying at least a floor in a business center, or better yet the entire building. But in this case, the account is already tens of millions of dollars,” says Elena Semenikhina, development director of GEMA Invest.

There will be more choice if the investor has an amount of 15 million rubles - which is equivalent to the cost of an apartment in the business class segment. “Compared to residential real estate, the income and return on investment in commercial properties is twice as high. If you can receive 4-6% per annum for an apartment purchased for subsequent rental, then street retail properties located in a good location bring 10% per annum. The payback period for an apartment is about 18 years, in the commercial real estate market - 9-10 years,” says Elena Mishina, development director at MIEL-Commercial Real Estate.

The most attractive areas for subsequent leasing to private investors are trading floors and street retail properties. These are premises with an area of ​​up to 500 square meters. m, located on streets with high traffic. Here, as a rule, small sales offices, bank branches, etc., as well as service enterprises (beauty salons, cafes, shops, etc.) are located.

“When assessing the investment attractiveness of real estate, you should be guided by two indicators: profitability and the delta of the cost of sale and acquisition. To date

The profitability of commercial real estate ranges from 9 to 13% per annum, in some cases it reaches 15%.

While the profitability of residential real estate in the mass segment is in the range of 6 - 8%, and in the elite segment - 2 - 5% per annum. The delta of the cost of sale and acquisition in both segments is approximately the same. Thus, according to these two indicators, investments in commercial real estate are the most interesting,” says Vladimir Sergunin, regional investment director at Colliers International Russia.

“The return on investment in housing is more than half as low as in street-retail premises, 4-5% per annum versus 9-10% per annum, and if the acquired street-retail property is located in a new building at the initial stage of construction, then sometimes the return on investment can reach 30%. A comparison of investments in residential and commercial real estate can be seen using an example. Let's compare rental rates: high-quality street-retail premises in the center of Moscow - more than $2,000/sq. m/year, offices within the Garden Ring average $800-850/sq. m/year, economy class apartment on the ground floor in a similar location - $300-350/sq. m/year. This example clearly shows that in the center of Moscow, for a rental business, it is much more profitable to use an apartment on the ground floor (if the apartment can be transferred to non-residential use) as non-residential premises,” says Denis Kolokolnikov, Chairman of the Board of Directors of the RRG Group of Companies.

The return on investment in both commercial and residential real estate depends on standard conditions: location, quality of the house or class of the business center, transport accessibility to the property, surrounding infrastructure. However, each case has its own risks. “It is believed that investments in residential real estate are usually more understandable for a private investor, but in this segment there are certain risks, primarily associated with the need to work with individuals.

Legal entities are more predictable and the landlord has more ability to collect fees when problems arise.

Another interesting difference between the office real estate market and the residential real estate market is that when a broker is involved in leasing space, the commission is usually paid by the landlord, and not by the tenant, as when renting out an apartment,” explains Elena Semenikhina.

However, in some cases, housing may be more profitable - but here you need to consider each specific option. “For example, the MIBC Moscow City offers two types of real estate: offices and apartments. So, apartments have a higher profitability, since they have a higher cost. If we compare the offices of Moscow City and the apartments of a nearby modern residential complex (House on Mosfilmovskaya), then the profitability will be higher for the offices of the MIBC Moscow City. Private investors should invest in non-residential premises on the ground floors of residential complexes. Such premises, especially if used for trade, have the highest profitability - up to 40% per annum. For private investors who have a limited budget, this will be the most profitable way to invest,” says Elena Karpova, head of the marketing department of SEZAR Group.

The payback period for commercial real estate in Moscow is about 10 years. “In my opinion, in Moscow, district shopping centers have high investment attractiveness; one might even say that this is a new niche with high potential. For example, a shopping center located inside a cluster with an area of ​​5-10 thousand square meters. m, has a payback period, today, from 8 to 11 years, and in some cases less, while the payback period for investments in a large shopping center is 9-14 years,” says Denis Kolokolnikov.

The common belief that real estate investing is simple and intuitive is not entirely true. Even rental and resale transactions, which are popular among novice investors, are accompanied by a huge number of nuances, the study of which in practice can result in significant losses.

To use all the capabilities of this tool, you should consider the known pros and cons of investing in real estate, study common operating techniques, and also become familiar with the main ways to generate income. Such an analysis can be used as a basis for choosing a direction, increasing the efficiency of investment activities and minimizing the risks associated with operations with capital of impressive sizes.

However, residential real estate investments are considered one of the safest in the long term. Purchasing apartments and houses as a way not only to protect capital from inflation, but also to create a source of guaranteed passive income, is characterized by a low level of risk and is recommended as a mandatory component of any investment portfolio. Due to high financial requirements, it is a little more difficult to work with commercial real estate, but even here, with some experience, you can successfully find objects worthy of attention.

Real estate investment: advantages and disadvantages

It is impossible to imagine professional investing without first studying all the characteristics of the chosen instrument. Profitable investments in real estate require especially careful attention and careful planning, since investors usually operate with investments of several million rubles, which significantly increases the price and the negative consequences of errors and omissions.

There are many types of such investments. The differences between them are in the size of capital, terms and expected profitability, but some common features can still be identified.

The advantages of investing in real estate include:

• A large selection of objects and areas depending on the investor’s capabilities (residential, commercial, foreign real estate);
• Partial or complete protection of investments from depreciation as a result of inflation (prices for objects remain quite high even during periods of crisis);
• Obtaining a guaranteed passive income of a set amount when renting out real estate;
• Growth trends in real estate prices in the future;
• Opportunity to receive tax benefits when purchasing residential real estate for the first time;
• The opportunity to save on purchases on credit when the purchasing power of the loan currency decreases.

Of course, this method of generating income is not without its drawbacks, including:

• Relatively low liquidity (real estate cannot be sold quickly without a significant reduction in price);
• Loss of time and money when selling or buying real estate - investments are accompanied by bureaucratic operations and payment of duties;
• Dependence of the cost of objects on the economic situation in the country and a particular region;
• High requirements for investment capital (the average transaction value is millions of rubles);
• Owning real estate comes with additional costs (payment of utilities, periodic repairs);
• The inability to predict the market value of the property in the future, especially when purchasing in anticipation of a price increase due to the expected development of infrastructure;
• The need to pay income tax when selling real estate earlier than five years after its purchase.

In addition, the value of the object may be affected by unforeseen circumstances - the construction of hazardous enterprises or large transport hubs nearby, the bankruptcy of city-forming economic entities, developers, or even climate change. Of course, it is impossible to foresee all the factors, but the analysis preceding investments in real estate in 2019 should necessarily include the study of not only the object itself, but also all of the listed trends.

How to start investing?

Regardless of the chosen method of generating income in real estate, investments must be consistent and gradual. In addition to minimizing risks, this method in some cases allows you to receive additional profit.

Determination of financial opportunities

Any investment in real estate and construction is preceded by an assessment of the size of one’s own assets. Based on this, the available directions and types of objects can be determined.

If you have limited options, you should first study how to invest in real estate with low capital: start working with land or housing in the early stages of construction. In addition, you can use collective investments in housing cooperatives and mutual funds, as well as attract co-investors for smaller objects - you can even find them on the Internet under the advertisements “I invest in the construction of real estate on an equity basis.”

Market research

The size of future profits depends on the quality of the preliminary analysis and the correct choice of segment. You should study price trends, assess the development potential of the selected area and determine whether it is worth investing in real estate at a given point in time: it is possible that the cost of objects is artificially inflated by realtors and developers.

Selecting an object

After choosing your preferred direction, you need to figure out which real estate is best to invest in. To do this, not only the object itself is studied, but also the area in which it is located - transport accessibility, environmental conditions, availability and prospects for growth of infrastructure are assessed. In addition, you should determine the method of generating income - some properties are better to resell, while others have significant rental potential.

Receiving a profit

Features of real estate investment suggest two possible ways to generate income - rental or resale. This determines the return on investment period:

1. The sale of the same apartment in a new building is possible at the time of completion of construction of a house or residential complex (2-3 years after its start);
2. Rent, depending on the purpose of the premises, pays off in 8–20 years (however, the object remains the property of the investor and can also be sold later).

At the profit-making stage, you can also increase the value of the property and the return on investment in real estate in 2019 in the following way:

• Redesign the property, improve its functional purpose, divide the rental property into two or more (for example, turn a two-room apartment or studio into two one-room apartments). In some cases, the price of real estate increases by 15–25%, and when renting, you can expect to receive a profit one and a half times greater;
• Add or add additional space. The easiest way to do this is in private houses by adding a balcony or veranda, but in ordinary apartments they sometimes combine a loggia with a room;
• Make repairs. Using high-quality materials allows you to increase the price by another 15–20%, and if you do the repairs yourself, you can also save on hiring a construction team;
• Change purpose. The transfer of real estate from non-residential to residential and back sometimes increases the value of the property several times - for example, apartments on the first floors, which are turned into shops with high rents, or the conversion of a former industrial premises into apartments and lofts.

Which property to invest in?

When choosing a region to work in, it is advisable to give preference to megacities, since investing in real estate in 2019 in large cities is much more profitable: this is due to the high liquidity of properties and constant demand. However, with a certain approach, you can find premises worthy of attention in small settlements - production areas, land plots for construction. In general, you can invest in real estate in Russia in:

• Objects for temporary or permanent residence of people (apartments, houses, cottages, apartments);
• Commercial objects (land for production, premises for shops and offices, industrial buildings, shopping and entertainment centers).

Residential Properties

Investing in residential real estate is the best investment for those just starting out. In this case, you can carry out both operations on the primary market (buy, sell and rent out properties in new buildings) and engage in secondary housing. The advantage of the second option is that the purchase can be made using a mortgage, after which you can immediately rent out the property and compensate for the costs associated with regular payments.

To determine whether real estate is worth investing in, you should consider the following factors:

• Location (in a prestigious, residential and environmentally friendly area);
• Layout (number and location of rooms, size of utility rooms);
• Condition (presence of repairs and general wear and tear of utility networks);
• Infrastructure (distance from kindergartens, schools, shops and clinics, availability of entrances and parking lots, accessibility to public transport).

Commercial real estate

Before investing in commercial real estate, you need to pay attention to the location of the property and its attractiveness for certain types of business:

• Take into account the availability of communications, storage and utility rooms, the possibility of access for heavy vehicles (for industrial premises);
• Assess the proximity to crowded places, the presence of transport interchanges and hubs, the distance from central streets (for retail premises and catering establishments);
• Assess the proximity to business centers and the availability of parking (for office premises).

Investments in commercial real estate are impossible without attracting a fairly large capital of 7–10 million rubles, however, high rent in this case allows you to recoup the investment much faster - within 6–8 years.

Land

Depending on the intended purpose, investments in land can be divided into short-term (construction sites) and long-term (agricultural land and industrial zones). At the same time, to purchase a land plot, the required amount of capital may be several times less than when working with ready-made construction projects.

Investing in plots is characterized by a number of advantages:

• There are no utility bills;
• Tax payments are much lower;
• The site does not require maintenance or repair;
• The purchase procedure and paperwork have been simplified;
• No realtor mediation required.

It should be noted that plots located in the zone of strategic interests of the state can be seized from the owners in accordance with Article 49 of the Land Code - this risk must be taken into account when choosing an investment object.

country estate

Residents of megacities often seek to purchase suburban housing for vacation or permanent residence, because they are aware of the harm caused to health by the constant noise, exhaust fumes and smog of large cities. Both mansions and summer cottages, cottages, and houses in the suburbs are popular. You can invest in country real estate through:

• Acquisition of unfinished objects;
• Purchases of finished houses and cottages;
• Purchase of land plots for future construction.

The cost of objects increases with the development of infrastructure, communications, gasification of houses and their connection to engineering systems - therefore, effective investment involves studying plans for the development of suburbs and small settlements.

Properties under construction

Despite the risk of freezing construction or bankruptcy of the developer, investments in the construction of residential real estate in its early stages are characterized by high profitability. The cost of the facility is continuously growing during the construction of the building and its commissioning, including:

• Laying the foundation;
• Construction of the first floors;
• Completion of installation work;
• Completion of finishing works;
• Handing over keys to the first residents;
• Construction of related infrastructure, landscaping.

At each of these stages, the price of an apartment increases by 8–10% and, as a result, for the most promising projects it can be twice the original price.

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Investments in real estate funds

Collective investments in real estate are carried out by mutual funds, which allow the accumulation of investors' funds. At the same time, the real estate is not registered as the property of the investor, and capital management is carried out by professional investors, which allows the average investor to save time, effort and money on paying taxes.

Additional advantages of investment funds are the opportunity to buy a share at an affordable price (no more than 300 thousand rubles) and gaining access to investments in almost any objects: shopping centers, multi-storey residential buildings, hotels, office buildings. For an investor with a small capital, there is simply no other opportunity to invest in such real estate.

Investments in foreign real estate

The most popular are resort towns and recreation areas where private investors have access to:

• Villas and cottages;
• Mini-hotels;
• Apartments;
• Collective investments in larger properties.

The cost of such real estate is often comparable to the price of a one-room apartment within the Moscow Ring Road, and the increased interest on the part of vacationing citizens makes it possible to set higher rents and rent out apartments not only monthly, but also daily, and even hourly. The only drawback of such objects is their pronounced seasonality, which apartments and hostels in large European cities do not have, allowing them to receive a constant income from the accommodation of tourists and travelers.

Hello. In this article we will talk about investing in real estate.

Today you will learn:

• Why investing in real estate is profitable;
• What types of real estate are there?
• What real estate can and should be invested in;
• How you can earn money with a minimum investment.

Investments in real estate have long been considered one of the most reliable. In people's minds, real estate is associated with reliability and constant rising prices. But is this really so? Is it profitable to invest in real estate given the realities of today's market?

Real estate investment goals

Money should make money. This most important principle of investing was formally formulated in the late 17th century. And despite his age, he is still relevant.

That's why any investment purpose - receiving income.

Real estate investing also has this goal.

Intermediate goals (ways in which you can earn income) are:

• Obtaining property for renting it out;
• Resale of property;

The first of these methods is much more stable and accurate. Almost any real estate can be guaranteed to be rented out, regardless of its type and quality. This is the most stable and low-income method of investment, with the exception of a bank deposit.

Earning money from the resale of real estate is a more interesting, risky and valuable way to earn money. It is quite difficult to resell real estate purchased for less money, but nevertheless, regardless of the economic situation, some real estate continues to rise in price.

But most investors prefer to rent out real estate for the first time and receive funds spent on investments, and after that think about selling it.

This method allows you to maximize your income because:

An apartment in Moscow costs 10 million. Every year its cost increases by 5% - 500 thousand rubles. They pay 60 thousand rubles – 720 thousand rubles for rent. Total income is 1 million 220 thousand rubles or 12% per annum.

Types of real estate investments

Real estate investment refers to .

There are four main types of real estate investments:

• Investments in commercial real estate;
• Investments in residential real estate;
• Investments in real estate construction;
• Investments in real estate abroad.

Each of them has its own characteristics and distinctive features, which characterize not only the real estate itself as an investment object, but also as a whole approach to investing money. Each of them differs in its own risks that the investor takes, strategies, and, accordingly, profit.

Investments in residential real estate

Investment in residential real estate means the purchase of:

• Rooms;
• Apartments;
• Houses;
• And other residential premises.

Residential real estate is good because the barrier to entry into this investment is quite low, the risks are minimal, and the investment is guaranteed to pay off. But at the same time, you can’t count on large short-term income.

The minimum investment amount varies greatly depending on the region.

Statistical fact : the price of residential real estate has fallen only 3 times in the entire modern history of Russia. In 1998, due to default, in 2008-2009, due to the global real estate crisis, and in 2015-2016, due to the Russian crisis. Over all the years since the beginning of the 90s, on average, the price of residential real estate has increased by 3-5% per year.

How can you make money on residential real estate? The first and main way is renting. As a landlord, you can earn from 120 to 300 thousand rubles a year without putting any effort into it. The second way is to increase the value of real estate over time. If an apartment costs 1,000,000 rubles when purchased, then we can safely say that after 3 years it will already cost 1,100,000 rubles.

The return on investment is quite long. In order to fully recoup the investment and achieve a net profit, it will take about 8-10 years, depending on the economic situation and the region. At the same time, you can start receiving stable deductions already in the first or second month after purchasing a home. But when investing in housing, you will need to make minimal repairs, attract good tenants, and make sure that nothing happens to the property.

The rise in housing prices depends very much on the region. In actively developing regions like the Belgorod region, real estate prices are growing faster due to the constant influx of new people. You should carefully select the region in which you want to invest.

It should be remembered that when investing in real estate, you should not buy a large home. Medium 1-2 room apartments are ideal, they are not as expensive as large ones, and therefore are in much greater demand.

Investments in commercial real estate

Investments in commercial real estate are a more complex type of investment that will require the investor to have good knowledge and analytical skills.

Commercial real estate as an investment object includes:

• The shops;
• Bars;
• Restaurants;
• Warehouses;
• Offices;
• Other premises.

Commercial real estate is used by other entrepreneurs or companies to make a profit. Profit also comes from renting out premises, as well as from a possible increase in the value of commercial real estate. But if living space is steadily becoming more expensive, then with commerce everything is not so simple.

Commercial real estate has been firmly showing negative price dynamics over the past few years, while demonstrating a huge drop in demand. This, of course, is due to the crisis, but also to the lack of development of small and medium-sized businesses, which primarily need rent.

A distinctive feature of commercial real estate is the high barrier to entry into business. Private individuals will no longer be able to simply buy an office or bar and rent it out. The problem of finding clients is also very acute for entrepreneurs. After all, contracts are concluded long-term, and a dilemma arises: either look for a more advantageous offer, or work with this particular client.

The risks are also quite high. Choosing a suitable property for a beginner is quite difficult, and you will also need to make competent repairs, attract the right clients and conclude a contract with them. The income in commercial real estate is much higher than in residential real estate, but the payback period remains the same: 8-10 years.

Investing in construction

The riskiest and most profitable type of real estate investment. It can be divided into two large categories: investment in the usual sense, and purchasing housing at an early stage of construction.

In the first case, a person invests his money in construction work, and after its completion, depending on the share, he receives a profit. A familiar scheme for all investors, and there is nothing new in it. Profit is determined according to investment.

The second method is much more interesting. Some construction companies sell apartments in their buildings even before they are built. This helps to attract additional funds for construction and complete the work. Such apartments are usually ready in 1-2 years, and the price at the time of their readiness is 1.5-2 times higher than the original one. But, it should be remembered that investing in construction is a much riskier activity than purchasing finished real estate.

You need to invest in construction wisely, studying every legal and economic aspect of the company, its reliability, experience in the market and reviews. With good investment, you can both win on the difference between the purchase price and the sale price, and get real estate at a lower cost, thereby reducing acquisition costs.

When drawing up and signing an agreement with a construction company, it is recommended to seek advice from a lawyer. He will be able to tell you whether this company is reliable, draw up a contract correctly, and if something goes wrong, then get advice.

Comparative characteristics of types of investments

In order to better understand what is more profitable for you, we will present you with a comparative description of the types of investments:

	Investments in residential real estate	Investments in commercial real estate	Investments in real estate construction
Attachments	Average	Maximum	Minimum
Income	Minimum	Maximum	Average
Payback	8-10 years	8-10 years	2-6 years
Liquidity	Average	Maximum	Minimum
Risks	Low	Average	Maximum
Which categories of investors are recommended?	Everyone	For beginners and more experienced	For experienced investors

As you can see, investing in commercial and residential real estate is suitable for both beginners and intermediate-experienced investors due to its simplicity and average stability. But despite this, the most profitable, in terms of payback, is investing in construction. And it is also the most risky.

Investing in residential real estate is suitable for everyone due to its high stability. There is no need to think that the investment will not pay off. They are guaranteed to generate income, regardless of the circumstances.f

Pros and cons of investing in real estate

Now about each point in a little more detail:

Pros:

Stability. It's hard to argue with this. Investments in real estate are one of the most reliable and stable sources of income. Regardless of the time of year, economic and political situation, housing and business sites are always needed by everyone.

Constant growth in asset values. Typically typical for residential real estate. Over a long distance, real estate behaves like gold – it steadily and confidently increases in value.

Passive source of income. By renting out real estate, or waiting for the price to rise, the investor spends a minimal amount of effort.

Minimal risks. As follows from the second point, housing and a place for business are always needed, so even in the most unfavorable times for the economy, there will be an opportunity to sell real estate or rent it out.

Minuses:

Illiquid investment object. Liquidity is the ability of an object to quickly turn into money without loss of value. Low liquidity of real estate means that it is difficult to sell it for its real value. Of course, you can sell an apartment/shop/any other premises very quickly by making a big discount, but this only indicates low liquidity and, accordingly, difficulty in selling.

Long payback. The most significant disadvantage of all. A payback period of 8-10 years is quite long even for long-term investment. Medium and small businesses pay for themselves in a period of 1 month to 2 years. And the financial investments there are the same.

Fixed maintenance costs. Utility bills and other expenses, if they are not borne by the tenant, fall on the shoulders of the investor. They significantly reduce income, forcing you to spend additional money.

The property owner will have to pay property taxes, when leasing, either income tax (if it is an organization) or (personal income tax). And after selling the property, you will also need to pay taxes, which makes the amount of income less by 13%.

It is up to each investor to decide what will outweigh - stability and constancy, or low liquidity, income and payback.

We have prepared five tips for novice investors:

Tip 1. You need to decide in advance on your financial capabilities and investment object. The subsequent strategy, investment of funds, or payback period will completely depend on this. The investor himself must understand how much money he has and what kind of real estate he can count on with it.

Choosing an investment object is the most difficult thing, because you need to understand that each type of real estate brings different income, different risks and different obligations.

Tip 2. Carefully study the real estate market and find an offer. Investments are an almost constant analysis, which is why you don’t need to rush to look for real estate for investment immediately after receiving money. You need to carefully study the offers that people make, see where the demand is, and so on.

Local and Russian ad platforms like Avito are ideal for this, where some people will help you understand what is for sale, and others what is rented. And based on this knowledge, you will need to find an object that will not have the highest price and will be in sufficient demand.

Tip 3. If possible, avoid using intermediaries. This applies more to residential property investments. Many people use the services of realtors when searching for an investment property. This is a fundamentally wrong approach. The realtor's job is to sell, your job is to buy. And here a conflict of interest arises, which should be avoided.

A complete comprehensive analysis of the real estate market can give an understanding of where to look for a good apartment.

Tip 4. It is necessary to use the services of a lawyer. It is best to entrust the drafting of contracts to a professional. After all, even a lease is best formalized legally. Yes, a decent part of the income is lost, but at the same time, if any audit occurs, you don’t have to be afraid of the unpleasant consequences that are guaranteed to arise if there is no contract and payment of taxes.

A personal lawyer will also be required when concluding an agreement with a construction company. It will help you understand the reliability of the company, point out controversial issues and vulnerabilities in the contract, and help protect your rights if such a need suddenly arises. Investment activity always requires a good lawyer who will help you understand all the legislative intricacies.

Tip 5. You need to forget about instant profits. Investments in real estate are long-term investments, and therefore they take a long time to pay off. Profit from resale can be obtained in 2-3 years, but rental income only in 6-9. This is why you should forget about making quick and easy money.

A few words about risks

Like any investment activity, investing in real estate is fraught with considerable risks. A few words about risks in Russian realities.

Mortgage risk. In Russia, the crisis of 2008-2009 was not as severe as in the rest of the world. Real estate fell in price, but not as much as in Europe and America. This is due to the fact that mortgages came to the Russian market quite late, only at the beginning of the 2000s.

The fall in prices in 2015-2016, in addition to the Russian crisis, is associated with the fact that the period for payments on 10-year mortgages has approached, and the default rate has increased noticeably. It is unknown what will happen when the 15- and 20-year terms come up, because in America, towards the repayment period, a crisis on a global scale broke out.

Housing risk. It is unknown whether the price minimum has now actually passed, or whether the cost of residential real estate has been unreasonably rising throughout the entire period of time. It is the issue with the minimum price that makes us talk about the riskiness of current investments in residential real estate.

You need to carefully monitor the situation, and as soon as it becomes clear whether real estate will continue to grow or show negative dynamics, then make decisions about investing in housing.

Risk in construction. There is no need to talk much about construction. Fake developers, double sales of apartments, and many other fraudulent schemes, which many people know firsthand.

Investing in houses under construction is really profitable, and it brings in a lot more money, but you need to weigh the risks, carefully study the companies and only then make decisions about investing in construction.

How to invest with minimal funds

Investing in real estate still requires much higher costs than other methods.

If there is not enough money, you can use one of the following methods:

Raising money. The most popular way to raise funds to purchase real estate is a mortgage. Loan secured by real estate. In the Russian understanding, this is a loan for real estate, secured by the same real estate.

Most banks will be happy to provide a mortgage. This will require a stable source of income, a good credit history, and a package of documents, which varies depending on the banks.

Depending on the banks, term, reliability and financial condition of the borrower, interest rates will vary. Basically, 11-17% per annum is provided for mortgages, and 5-7% - if there is a loan in foreign currency.

The good thing about this method is that you can pay your monthly mortgage payments with the money you get from rent. If you purchase wisely and rent at a favorable price, you can obtain ownership of the property for free, the loan for which will be paid by the tenant.

Attracting co-investors. In Russia, the idea of ​​joint investment is just developing, which is why there is no need to talk about this method seriously yet.

Very rarely do investors have the opportunity to actually find partners who will be willing to claim in equal shares (or depending on the contribution) the income from real estate without interfering with the profit. At the same time, the opportunity to involve friends or relatives in an investment project will make investments smaller and noticeably more profitable.

Joining the Investors Club. There are many communities where investors are looking for like-minded people who can help each other not only with advice, but also financially. In such clubs there are many people who, on investment terms, can invest in your project, and this way you can earn independent income and provide profits to your partners.

This is also a fairly new idea for Russia. It consists of collective financing. You can launch a project that will attract investments so that you can invest them in real estate.

The investment project will have to work as a whole joint stock company - people will buy shares in this project and count on profit. Suitable for the purchase and rental of commercial real estate, and subsequent sale.

Raising funds to purchase real estate on your own is quite difficult. That is why beginners are recommended to attract partners by any available means. More experienced investors will be able not only to invest funds, but also to guide them in the right direction, helping and training at first. This is a much more valuable experience, even more important than making a profit.

Robert Kiyosaki - one of the world's most famous businessmen and self-development trainers, wrote a book that every real estate investor must read. It’s called “Real Estate Investments”.

It provides a detailed strategy for those who want to invest in real estate and own 5-6 properties by the age of 40, and have a stable passive income without doing practically anything. The book is full of interesting things and pitfalls. It will be useful to everyone, even though it is more adapted to Western and Eastern realities than to Russian and CIS countries.

Summing up the conclusion : Real estate investment is one of the most talked about and popular way of investment among ordinary people. It is characterized by minimal requirements for investor experience, but is extremely demanding on the wallet. The return on investment in real estate is 2-9 years, depending on the chosen method of income.