By Robert Felipe Medina
Investing in real estate is one of the best ways to secure your future and your money. However, when acquiring a property, you need to consider certain factors to ensure your investment is profitable, has a margin of safety, and is beneficial.
Access, tax benefits, capital gains, location, and developments around the property are vital elements that you should investigate, but they are not the only ones you should consider if you are thinking of acquiring a property.
In fact, investing where everyone else is investing doesn't guarantee that your capital is safe, and that's why many don't dare to invest in real estate; they're afraid of making a bad decision or taking a high risk.
If you're afraid and thinking about investing but don't know where to start, we've prepared seven steps to consider for success. This way, you'll have a checklist-type method before making any investment and feel more confident when making your purchase.
1. Identify the objective of your investment
Although it may seem obvious, one of the first steps you should take is to define the objective of your investment. And we're not just talking about the amount you want to invest, but also the use you'll give the property and the type of asset you want to acquire.
Why do you want to buy the property? To rent it out, resell it, or live in it with your family? It's important to know your purpose for making the investment so you can clearly identify the area where it's most convenient for you to buy.
Buying a house to live in is not the same as buying one to rent out. Perhaps it would be more convenient for you to buy a home in a gated community with the best amenities for your family, but if you're thinking of renting it out, it might be more convenient to look for an apartment in a tourist destination like Punta Cana, Bayahibe, the Colonial Zone of Santo Domingo, or in an area near universities or hospitals.
2. Use taxes strategically
Benjamin Franklin said that no one escapes death or taxes, but every dollar saved on taxes is money free to invest; this is one of the pillars of wealth creation for investors. There are many ways to save on taxes, including providing housing, creating jobs, or supporting charitable organizations.
Meet with your advisor for a training session on tax law to determine which investment areas offer the greatest benefits—this is key. For example, Law No. 158-01 establishes tax exemptions for the tourism sector regarding income tax (ISR), corporate capital taxes, and national and municipal taxes for company formation and capital increases in existing companies, making real estate investments more profitable where these benefits exist.
3. Choose a good real estate agency
Working with a reputable and experienced real estate company is the ideal option, as it guarantees they have the expertise to identify the best areas for investment, understand the city's growth trajectory, and determine the ideal property for your needs. This is especially important if you don't live in the city where you want to invest.
Buying a property shouldn't cause you worries or problems; on the contrary, it's an investment that, to a certain extent, secures your money and your future. That's why one of the first steps is to verify and research the real estate agency you're signing the contract with or the one advising you throughout the process.
An experienced real estate agency knows the legal processes you need to complete the contract — which will give you peace of mind — and will guide you through the process to make you feel more secure.
Another element to consider is the relationship between the real estate agency and the construction company building the project. We advise you to look for companies that not only sell but also build, as this guarantees that the properties are designed and built from the ground up, with amenities that meet needs based on their experience with buyers.
4. Invest for the long term
In business and investments, higher returns always come with higher risk, and the biggest mistake many people make when investing in real estate is expecting an immediate return on investment. Obviously, we're not saying this is impossible; in fact, some people buy properties to rent out and start generating income the same month they buy. However, when investing in real estate, you should keep in mind that rather than investing simply because "everyone else is doing it" or "because it's trendy," you should invest intelligently and strategically to grow your money. And that takes time.
You've probably heard that real estate is an excellent investment because its value increases over time. This is due to increased property value (which we'll explain later). This appreciation takes time; it doesn't happen overnight. Property value doesn't depend on you, but rather on the location of the area and all the surrounding developments, which increase the difference between the purchase price and the selling price, ultimately benefiting you. In other words, you'll earn more for something that cost you less.
As you can imagine, a smart investor is one who seizes opportunities when others don't, such as acquiring property in an area that, in the long run, will attract people who need a product they already own: a house, an apartment, a villa, etc. This is why having a long-term vision will allow you to achieve better returns on your investment, as it will help you choose the right area by considering its potential development. And it will prevent you from feeling disappointed by not seeing your money immediately.
The most important thing is to assess the area's potential: What's being built nearby? What will be built there? How is the market performing in the area where you want to invest? And so on. It's clear that you can invest in real estate even during times of crisis, since you know it's one of the safest investments available; but that doesn't mean you shouldn't analyze the situation to determine your best options. As mentioned in the previous point, to take advantage of a good buying opportunity, you must learn to see beyond the current state of the area and focus on the services that will be built there: schools, hospitals, plazas, etc. And not just the developments; you have to analyze the market: who is coming, from where, what the growth rates are, and so forth.
5.Calculate that the property will generate added value
Capital appreciation is one of the most important factors in acquiring an asset of this nature. It's the increase in a property's value, that is, the monetary difference between the purchase and sale price. This increase is driven by the property's location and the length of time you own it. Shopping centers, developments, schools, hospitals, connectivity, and so on—many factors influence capital appreciation that are beyond our control. And as mentioned earlier, the ability to see beyond the current state of the area is key to making a sound investment.
Factors like safety and tranquility greatly influence property value. Often, in our eagerness to make a good purchase or take advantage of a bargain, we focus solely on the property's price and overlook the area's potential for growth (or lack thereof) and its security. Would you live in a beautiful house in a high-crime area? Probably not. One of the critical points when buying property is considering the difficulty of selling it later. Ask yourself, "How much will it cost me to sell this property?" If the answer is "a lot," it's probably not a good investment. Conversely, if the proximity to shopping areas, the location, and the urban development plan lead you to believe that selling will be minimal because it will practically sell itself, then take advantage. Punta Cana is an excellent option for real estate investment, especially in residential or industrial lots.
6. Pre-order
Buying houses and apartments in pre-construction has many benefits that you should take advantage of, depending on what you're looking to buy. For example, if you want to acquire a property to live in, buying in pre-construction guarantees you can choose the property you like best before anyone else, according to your needs. Pre-construction real estate typically costs 10 to 30% less than when completed. This discount percentage depends on the stage of construction of the property, the type of construction company managing the project, and the terms under which the property is acquired.
However, one of the biggest benefits of buying pre-construction is that it ensures a higher return on investment, since the prices of houses or properties increase as the construction period progresses or as they become more popular. As we explained regarding appreciation, buying pre-construction can be a decisive factor in making a good investment, as you can acquire a property at a lower cost than it would under other circumstances (for example, once the properties or developments planned for the area are finished).
7. Consider access, connectivity, and amenities
Access and connectivity of the property are two of the elements that drive the growth of the property's added value and are the most frequently mentioned, so you should consider them in detail.
It's not just about what's nearby, but how we can access it and what other places it might lead us to. It can also give you clues on how to make your investment yield more. For example, if you buy a property near a university, what kind of market do you think would be interested? Professors, students, people coming from other countries or cities to study, even educational service offices—in other words, people who will be most interested in the property's proximity to their work.
The amenities of a property also contribute to its increased value. The desire of residents to improve their well-being and quality of life has led real estate developers to focus on providing spaces that residents can comfortably enjoy according to their priorities. Gyms, swimming pools, pet areas, parks, and private security are some of the features that have become increasingly attractive to those who decide to purchase a property, as they allow them to enjoy a peaceful life without having to travel long distances or worry about acquiring these amenities themselves (such as paying for memberships or building them).
Try to invest in properties with amenities that increase their value. Of course, taking into account factors such as the property's location and high-value areas, amenities will add more value to the home if they align with market needs; for example, a gym in an apartment building is more attractive to its residents.
The best time to invest is right here, right now! If you want to secure your future and guarantee your investment, you need to start immediately! The longer you wait, the harder it will be to invest in real estate, whether due to availability issues or rising property prices, especially in areas that are becoming increasingly popular due to their potential. Do it now! Start applying our 7 steps, contact a real estate agency, and begin investing in real estate for a better future, whether for yourself or your family.
Founder @ftanegocios, entrepreneur, author of “More than Rich, finance and investment, mentoring, motivation, accounting, taxes.
