Things to Consider for Investing in the European Real Estate Market
Despite some of the critics, “The Old Continent” continues to provide great real estate investment opportunities, both in developed and less developed areas. For the past 20 years, Europe had been a great place for savvy rental property investors and if you would also like to get started in this industry, we would like to give you a few hints on what should be taken into account, in order to not encounter major disappointments.
Understand your target market
Europe is a complex mix of cultures and although most of the countries are part of the European Union, you’ll still find plenty of particularities throughout different areas. Even between cities of the same countries, you’ll notice that real estate developments are different. Because of that, as a real estate investor, you’ll need to gain an in-depth understanding of the area where you want to invest.
By that, we mean regulation, real estate benefits, previous real estate market cycles, current valuations as compared to the past few decades, the potential for further economic and demographic development, and many others. If you’ve done your homework and all of these details had been taken into account before investing in a European country, you’ll not only be able to leverage to the max the potential of that particular area, but you’ll also manage to anticipate future market moves.
Pay close attention to financial planning
If your goal is to buy a property and rent them for a few years in order to sell at a much higher price, it may seem like a straightforward activity, but actually rental property financing can be a tricky part. Be aware that this is not like buying a home for your personal use. When we talk about income property, many unexpected things can appear.
You don’t know how your tenants will treat the property and what expenses you’ll have to cover on an annual basis. According to Ofir Eyal Bar, a partner of real estate company Aspen Group, this is where most of the beginners stumble. Some real estate investors choose to get a low-interest loan in order to ensure financial stability.
Managing the rental property
As we’ve mentioned above, rental property has to be managed on a constant basis, if you want its value to go up over the next few years. Luckily, in Europe there are plenty of property management companies, which generally charge between 5% and 10% of the monthly rent. For some investors, this is a considerable amount and if don’t want to pay for it, you’ll have to take care of everything. Writing contracts, working out insurance plans, collecting rent, handling maintenance, and other activities will have to be done on a constant basis.
Have a progressive approach
If you get to this section of our material, you’ve probably already noticed there taking care of a property involves plenty of tasks to handle. Because of that, don’t rush into buying a few properties from the very start. Do the research, see what area suits your needs, make a purchase, go through all of the above-mentioned steps and only after you’ve managed to perform them, make the second purchase.
This is a process not an easy way to make money and there are plenty of things which you have to learn. Put your money to work, don’t spend them on your mistakes, because you won’t be able to do everything perfectly from the beginning. Make sure to have a conservative approach at the beginning, so your mistakes will be less expensive.
Without a doubt, you’ll manage to find plenty of real estate investment opportunities across Europe, but as we’ve tried to highlight, you need to develop several skills and an in-depth understanding in order to be able to leverage that potential.