Twelve Types of Investment Property You Should Always Avoid In Your Investing Activity
While there is a huge number of precautions, rules, and pieces of advice that you shall follow when working in the market of real estate investment (and we wrote already about so many in our previous blog posts), there are certain no-no’s, which you definitely should stay away from. We’re concisely listing below 12 kinds of property, which you don’t even have to consider if you’re a wise investor and a wise person.
1. Bad location
Any real estate is a bad investment if it’s located in an area or neighborhood, which is bad. It could be bad for various reasons: high crime rate, inhabited by junkies or poor anti-social underclass, with underdeveloped or dilapidating infrastructure, high general vacancy rate, old buildings with wet walls, close to loud airports, factories, railways, or the area suffers frequently from natural disasters (or hasn’t restored yet after the last major one). Is it possible to come up with a picture of poorer bad investments examples than a bad location? Currently, it’s the most powerful no-no.
2. Located in a one-industry town
Simply think, what happens when a city-forming enterprise stops functioning? Everyone leaves it so it’ll resemble a haunted house – empty, dark, and scary. Even though Earth’s population is growing, for many and many towns, it is a matter of “when”, not “if”.
3. An object being a long time on the market
If an offer hasn’t been swept yet off the market as a great offer & stays on it for too long, obviously, it is something wrong with it. What, for instance? Unreliability of a seller, hidden problems (and the owner wouldn’t let inspectors in), constructive problems (leading to wall cracks or whatever), too high price without a reason, legal problems of this object (arrested, disputed, etc.)… The list can be country-specific and state-specific.
4. Extremely neglected/dilapidating object
Independently of the reason for the neglect, an object, which has multiple issues of its condition, might (or, more surely, will) require large expenses for its repairs now and loads of money to maintain it in a good state in the future. Some problems may be so serious that even a very good monthly cash inflow could not be able to cover the expenses for repairs, which will drain your pocket on and on.
5. A property bought just for appreciation, no rental income
While it is generally known that real estate in the US is appreciating over time very significantly (the same as in many other countries), you should carefully do your due diligence before buying some object that would simply stand and wait until prices go up. There are a lot of connected issues with such a purchase, which might prevent your property from growing up in the price at all, like annual taxes, ever-increasing degree of decrepitude, stagnating market or the area…
6. Negative cash flow objects
There are some objects, which only generate cash inflow periodically – like ones by the sea in the summer months. Or vacation rentals, which show a high percentage of vacancy rate throughout the year. These objects will take money from you on the annual basis, not add. And they are hard to sell profitably.
7. Overly luxurious objects
While many of us nurture the idea of renting some luxurious place to stay there for vacation or for holidays, most of us eventually don’t land on it. Even if such a property is super fine and gorgeous per se, it might stay vacant for the most time because of the silly high price tag. The same as the previous, it is a negative cash flow object. Eventually, you’re lowering the price tag or selling it for good with a hefty discount.
8. Objects too costly for you
There are some very fine objects, which generate a lucrative income. But if they’re just too costly for you, you don’t want them. Otherwise, after the first major disruption in cash flows, you could end up giving away your property to the bank, which lend you the money for the purchase, to cover your super costly investment.
9. Airbnb objects with bad Airbnb legislation
An increasingly bigger number of states, cities, and territories in cities across the globe forbid Airbnb and similar services to operate in them. The reasons are lying on the surface: loud parties, vomiting drunkards around, growing crime rate, and pulled-up prices for regular housing in the area. And you don’t want to be impacted by such restrictions.
This is a notion when you pair up with someone or several investors to buy a single property object. While pooling might seem a good idea at first, most of such business ideas crack up because of the reluctance of parties to fulfill their obligations, desire to take more money, quarreling with one another, and persisting on selling shares of others in the object for an unfair price. A golden rule of life and business is applied here: wanna do something good? Then do it yourself.
11. Time-sharing objects
In these objects, you only own a certain time when you can live there or let them for rent. Let’s say, from 5th of May to 11th of June. The rest of the time belongs to other holders. These are not good for renting at all and are very hard to sell for a normal price.
12. Real estate development
Unless you operate tens of millions of dollars and have 10+ years of hands-on everyday experience in developing new objects from ground to commissioning, you don’t want to get into any of these undertakings. These are only great real estate investments for large companies and wealthy persons, like, owners of private equity funds, who improve their wealth via development activities.
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More about DGY
DGY is a real estate investment and property management company. Our experts have an impressive experience in turning businessmen into smart real estate investors. We collect limitless opportunities throughout the world’s best real estate markets and help our clients implement the best deals. We take care of all due diligence and customize documentation while your income grows. We also provide you with property management services so you can forget about the tiresome maintenance of several objects and entrust this process to professionals.
Investment advice and recommendations
DGY is an investment company that takes care of every client and helps them become successful investors. With the help of an investment experience and a well-thought plan, we will help you examine the market, choose a strategy specifically for you or your business, and calculate future costs to start making money with real estate investment.
In order to invest in real estate, you should consider how you will run your management in Ukraine. DGY will help you eliminate all possible pitfalls at an early stage as a personal project manager will be assigned to your case. They will assist you in choosing the project according to all required objectives.
DGY Investments takes care not only of purchasing property but also renovating an existing one. With the help of a thorough plan and estimating, we will thoroughly prepare a property for sale. Our professionals evaluate an investment property and create a strategy that includes the costs for renovation, possible taxes, fluctuations on the market, etc. Therefore, our clients are able to resell the renovated properties in Ukraine with more than 15-20% profit from the initial price.
Before our clients decide to deal with real estate investing, they consult with our experts concerning details such as the necessary documents needed to purchase a property and successfully run all the processes connected to it.
Therefore, if you are eager to invest in Ukraine, it’s essential to have all the paperwork done correctly, and that’s the moment when our team of experts takes care of this step. DGY Investments helps investors buy real estate property, manage the paperwork, start preparing relevant documents for purchasing realty in Ukraine, and close the deal successfully.
Real estate investment opportunities in Ukraine
When an investor decides to invest in real estate in Ukraine, the most affordable way to attain stable passive income is through buying residential real estate. Investors can expect to receive a regular monthly payment from their tenants at a fixed monthly amount, unaffected by inflation or other unforeseen circumstances. The amount of rental income will vary depending on the size, type of property and location. For example, buying an apartment in Ukraine’s capital Kyiv is beneficial to investors due to offering a large working population, central location and affordable prices. Hence, the minimum price of renting a decent one-bedroom apartment in Shevchenkivskyi District will be around $1000 per month in 2021, followed by Pecherskyi District with a cost of $850 per month. Besides, investing in real estate in Ukraine annually brings clever investors up to 15% of yield, attracting many business people every year.
Properties for investments in Ukraine
Ukraine has a giant sector for real estate investing. Businessmen who come there all over the world often choose between investing in residential and commercial properties. The main advantage of buying property in Ukraine is the affordability of prices on the houses and apartments. For instance, if you invest in real estate in a historical district, a luxurious apartment will cost you around $85k only.
How to invest in Ukrainian Real Estate
In order to invest in Ukrainian real estate, you should take into account a list of crucial factors. The first one is to choose what kind of realty you are going to invest in: residential or commercial. It is vital as it should comply with Ukrainian real estate law. The second tip is to identify the purpose of purchase in order to make a strategy for the property. For instance, you may purchase the property for your own use or buy it for lease. The next step is to calculate the taxes and what kinds of taxes are payable during the purchase, owning, or selling. Also, to invest in real estate properly, you should keep in mind currency control rules in Ukraine to sell a property and get a higher profit.