It’s like a trend these days! Investing in real estate can be a great way to grow your wealth, but it’s important to know what you’re doing. As property values increase, your investment can grow. You can also earn money through rental properties or enjoy tax benefits like mortgage interest deductions.
Plus, real estate can help protect your money from inflation and is an important part of long-term financial planning, such as saving for retirement. In this article, Realestate.com.kh will walk you through the basics, from making a financial plan to choosing the right property type and understanding the market!
Understanding About Financial Planning
Before jumping into any investment, it’s important to have a financial plan. A financial plan helps you understand where you are financially, where you want to go, and how to get there. You can make your own plan or work with a financial expert. A good financial plan covers things like retirement, budgeting, and paying off debt.
Types of financial planning are divided into three categories:
- Short-Term Financial Planning focuses on addressing current matters and typically shows results within a year. Examples of personal goals in this category include reducing or paying off debt, creating an emergency fund, and more. For business goals, this could involve achieving target revenues, securing funding, or other short-term objectives.
- Medium-Term Financial Planning serves as a transitional phase between short-term and long-term goals, usually spanning up to five years. This planning involves resolving immediate issues (such as credit card debt) to focus on goals that require more time, such as saving for property or starting a business. Businesses may consider launching new product lines or entering new markets during this period.
- Long-Term Financial Planning is generally designed for periods exceeding five years and requires significant financial resources. Common long-term goals include saving for retirement, funding children’s education, or paying off substantial debt. For businesses, long-term financial objectives might involve automation, improving cash flow efficiency, and reducing expenses.
Having a financial plan helps both individuals and businesses track where they are financially and figure out what they need to do to meet their goals. It’s essential for achieving short-, medium-, and long-term objectives.
Types of Real Estate Investments
Investing in real estate can create wealth, but it’s a long-term commitment that requires a solid plan. While real estate offers great potential for high returns, it requires careful research and choosing the right property. According to an excerpt from the ROCKET Mortgage website, Here are three popular types of real estate investments:
Residential Real Estate
Residential property is a type of real estate used for living, such as houses, condos, and apartments. Generally, one can invest in this type of property by buying it at a low price and selling it for a profit or renting it out to generate income.
For example, if we buy a condo, which generally costs around $50,000 or more, and rent it out for $800 or $1,000 per month, we can use the rental income to repay the bank if we borrow money to purchase the property. However, if we buy the property with our own funds, we can use the rental income to invest in additional properties.
Commercial Real Estate
In Cambodia, commercial properties include a diverse range of buildings such as shopping malls, retail stores, office buildings, hotels, casinos, private hospitals, and private educational institutions. These properties offer multifaceted functionalities beyond those of residential properties.
For instance, Vattanac Capital in Phnom Penh is a prominent commercial property that houses luxury retail stores, office spaces, and the Rosewood Phnom Penh Hotel. This 39-story building serves as a comprehensive commercial hub, integrating shopping, business, and hospitality services.
Investing in such commercial properties can provide more stable cash flow compared to residential properties. Commercial buildings often contain multiple units or spaces, allowing for diversified income streams. Additionally, lease terms for commercial properties in Cambodia can be long-term, typically ranging from 5 to 10 years, offering investors greater financial stability.
Raw Land
Raw land refers to an undeveloped property with no structures or improvements, often making it cheaper to acquire than developed land. Investors may buy raw land with the intention of leasing it for agricultural purposes or holding it for future development.
One of the key advantages of investing in raw land is that it is easier to acquire, has lower maintenance costs, and offers versatility, allowing investors to buy, lease, or build on it. However, while raw land offers several benefits, investors should conduct thorough due diligence, including verifying land titles, understanding zoning regulations, and assessing infrastructure development plans in the area.
Engaging with local real estate experts and legal advisors like realestate.com.kh can help navigate the complexities of land investment in Cambodia.
Each type of investment comes with its risks and benefits. Real estate can be very profitable, but it’s important to carefully consider how involved you want to be.
Understanding Market Trends and Location
Where your property is located matters a lot. Areas with good economic growth, strong demand, and good infrastructure usually see property values go up. It affects how much the property value will increase, how many people want to rent it, and the rules or taxes that apply in the area.
Properties in high-demand areas with strong economies usually grow in value faster and attract good tenants, making them great investment choices. For instance, Phnom Penh’s most popular area currently is Beong Keng Kang 1 or BKK1, which is known for its upscale lifestyle, vibrant business hub, and modern infrastructure. BKK1 is home to luxury condos, trendy cafes, international schools, and embassies, making it highly attractive to both locals and expatriates. Investing in a property here not only promises potential for value appreciation but also ensures a steady stream of high-quality tenants.
Another example, in the Toul Kork area of Phnom Penh, property prices are rising because of the fast development, better infrastructure, and growing demand for both homes and businesses. According to data from AMS Economy in 2023, land prices in Toul Kork have been steadily going up, ranging from $1,800 to $6,000 per square meter.
This is due to important improvements, like new roads, schools, and shopping areas, which make the location even more appealing. Investors can use this information to better understand the market, find new opportunities, and reduce risks that could affect their finances.
How to Get Started with Your Real Estate Investment Plan
Start by setting clear financial goals and deciding when you want to reach them. This will guide you in choosing the right type of property to invest in. Also, think about your risk tolerance—whether you’re comfortable with high-risk, high-reward investments or prefer more stable options.
It’s also a good idea to work with real estate experts, like Realestate.com.kh, who can help you make smart investment choices. They can help you refine your strategy and give you the confidence to take action. Real estate investing works best when your plan is tailored to your personal financial goals and needs. Take the time to create a strategy that fits your goals, and you’ll have a much better chance of success.
Ready to get started? Reach out to us and begin building your own personalized investment plan today!
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