How To Invest In Real Estate

Investing money in real estate is one of the most sustainable ways to build wealth. Land and space, both of which are needed for any configuration of real estate property, are finite. And with inflation and the increased demand from the growing population, portfolio value appreciation is practically inevitable.

However, it is essential to understand the fundamentals before making an investment. This way, you can make informed decisions and identify profitable opportunities that best align with your preferred risk exposure and investment horizon.

What is Real Estate Investing?

Real estate investing is a potentially revenue-generating option if you want to put money in any of the different types of real estate:

• Residential properties
• Commercial properties
• Land and development
• Real Estate Investment Trusts (REITs)

The goal for investors typically involves generating passive income through rental payments, which create a steady stream of cash. Meanwhile, for others, the goal is capital growth, where profit is realised when the property is flipped or refinanced after its value has appreciated.

In Cyprus specifically, real estate investing is also motivated by tax benefits. A purchase is a quick ticket to permanent residency, which means enjoying no inheritance tax, low corporate taxes, and other incentives.

The current real estate market in the country is experiencing a boom at present. Tourism has increased in recent years. With Cyprus expected to become part of the Schengen Area by the end of the year or early 2026, property values are anticipated to increase.

Ways to Start Investing in Real Estate

There are various ways to invest in real estate, each with its characteristics, benefits, and risks. Learn more about each of them and see what appeals to your investor sensibilities.

Buy and Hold

Buy and hold refers to purchasing a property with the intention of having it for long-term ownership. The primary method of generating returns is through rentals. And even as beginners, there are multiple ways that you can lease the property:

• Short-term rentals. Short-term rentals are a great option if you invest in a luxury property or one that attracts a lot of tourists. Here, you’re opening the chance to lease for just a few days up to a month. This strategy can generate a lot of money, but during the off-season, you may not get a lot of bookings.

• Long-term rentals. Long-term rentals, which are typically at least six months to a year, are ideal for those seeking a steady income. This approach is efficient for properties in residential communities. However, the earning potential of the property is fixed based on the terms of the contract.

• House hacking. House hacking is a great way to build equity on a residential property that you’re living in. For example, you can convert your house into a multiplex, allowing you to rent out units. When you invest in this way, your tenants will essentially contribute to your mortgage and expenses while you retain full ownership.

If you want to buy and lease a real estate property, Cronaproperty can help you out. Our services cover both purchasing and leasing your investment, so that you can maximise your returns effortlessly.

Commercial Real Estate

Commercial real estate is investing in office and retail space. Here, there's a potential for consistent income since businesses typically lease on a longer term. This level of stability makes it a suitable option for investment.

However, compared to residential spaces, this may require fairly substantial funds. It may also involve navigating management challenges, such as intricate lease agreements, negotiations with multiple tenants, and higher-scale property maintenance.

It’s also worth noting that not everything in the commercial real estate market is a sure win. That is why you must examine crucial aspects of property analysis, such as accessibility, supply and demand, zoning laws, and capital expenditures.

Real Estate Investment Trusts (REITs)

Investing in real estate may not necessarily involve buying actual property yourself. Instead of the more conventional approach, you purchase shares in Real Estate Investment Trusts (REITs). Then, the pooled funds are used to purchase real estate. Therefore, if you don’t have substantial funds, this option still allows you to invest.

Here, there are two ways that you can make money. First, this is achieved through the increased value of the specific REIT share that you purchased. However, you’ll only be able to realise this value once you sell. The second one is through dividends, which can be a good way to earn some money every month.

Real Estate Crowdfunding

Investing through a crowdfunding platform enables you to invest in a specific project. In a way, this is like REITs because you don’t need to have all the funds required for the purchase. So, even if you don’t have a lot of capital, you can still invest.

Unlike with REITs, where you can sell your shares at any time, your money will not be liquid for a long time. However, you have more control over where your funds will go, as you can choose from various properties and projects, which means a greater level of transparency and control over the level of risk involved.

If you want to enter the real estate market this way, find a reputable and legitimate crowdfunding platform. Then, review and select from the available investment opportunities. 

Real Estate Partnerships

A real estate partnership allows you to invest alongside partners, which helps distribute the funds and manage day-to-day operations. However, before going in, all parties involved should decide on the following:

• Selecting an investment strategy. The real estate market is enormous. There should be an agreement on the types of investments to be pursued and their respective locations.

• Distributing roles and responsibilities. Will they be an active or passive partner? There should be a clear understanding of everyone’s roles so that the entire operation runs smoothly.

• Reducing risks. To minimise issues, a formal partnership structure should be established, including the setting up of a legal entity. Everyone should also agree on what kind of due diligence is required before finalising the partnership.

Only pursue this investment option if there’s a high level of transparency. More importantly, make sure that the partner is a good fit based on your goals.

How to Invest in Real Estate

Now that we’ve covered the ways you can invest, let's focus on the how. The following explains the step-by-step process that will help you minimise risks and choose the right strategy.

Real Estate Investing Basics

You need more than funds if you want to invest in the real estate market. You should also absorb valuable real estate knowledge before pursuing your first investment. There are numerous resources available, including courses, books, blogs, forums, and consulting with experts. Both free and paid options are available.

It is also worth emphasising the importance of understanding basic terms such as rental yield, capitalisation, and property valuation to begin investing successfully. These allow you to have a better grasp of the activities involved when you’re investing. More importantly, you’ll have a better sense of how profitable your investment is. 

Assessing Risk and Investment Readiness

As lucrative as the real estate market can be, it still doesn't guarantee profits. Should you lose your initial funding, do you have a financial safety net in place? When evaluating your investment readiness, also consider your preparedness for potential losses. To be truly ready to invest, make sure that you've done these two things:

1. Assess your risk level. Your financial resources, personal preferences, and current expenditures may limit the risk you’re willing to take. Generally, a willingness to take on higher risk means embracing more volatile options with higher profit potential.

2. Identify your funding source. These funds should be kept separate from your living expenses. Apart from the money that you’re willing to invest in the real estate market, there should be a safety net as well.

Once you’ve done both of these, it will be much easier to narrow down which strategy will work best for you.

Choosing a Real Estate Market

For this step, you need to find a location that fits your budget. After this initial narrowing down, selecting the market that you want to pursue should take into account various factors like the following:

• Economic conditions of the region. Areas with high economic activity and low unemployment rates tend to attract more people.

• Potential growth in housing prices. A good starting point would be examining historical data related to the real estate market.

• Market demand and population growth. See if the demand is currently higher than the supply. Evaluate the potential population growth as well. If you're considering short-term rentals, check the local trends in tourist numbers.

Now, these are just the most basic. You should also look into the location's investment in infrastructure development, vacancy rates, and rental yields.

Choose the Type of Real Estate Investment

You can invest in residential, commercial properties or construction projects. You can also indirectly participate in the real estate market through REITs (Real Estate Investment Trusts).

If you’re looking for a more passive approach, we recommend REITs or any form of pooled investments. For these options, someone else manages the funds on your behalf. So, you can focus more on further diversifying and tracking your profits.

Finding the Right Properties

The right property will depend on three factors: location, condition, and price. Location is important because some places will be in greater demand than others. The condition is also essential, as it will determine whether you need to invest in repairs or upgrades. Based on your budget, you need to narrow your options according to price.

For this step, you can explore many ways of finding a property. The most common is using online resources. You can also find properties that are up for auction or foreclosure. Finally, you can consult with agents from reputable and licensed companies, such as Cronaproperty. We can lend our expert insights to help you identify profitable opportunities in the market.

Financing Your Real Estate Investment

Although it helps to already have some cash on hand, you don't need to have the entire amount to complete the purchase. There are a few methods that you can use to finance a real estate purchase:

• Mortgage. You put down a down payment and use the value of the asset that you’re buying as the collateral for the loan.

• Private loans. You can borrow funds from a private lender, like a family member or a friend.

• Bank loans. You can borrow money from a bank. The terms here will depend on the specific loan that you’re getting.

• Equity. You’re borrowing against the equity of an asset that you already have.

When selecting the best option for you, consider your available funds, potential collateral, interest rates, and payment terms. Generally, loans backed by collateral are cheaper because the risk for the lender is lower.

Tracking Profit and Losses

Monitoring the performance of your investment can involve tracking any of the following:

• Rental income
• Property appreciation
• Share price (for REITs)

If you have a comprehensive and/or diverse real estate portfolio, create profit-loss statements. This way, you can also evaluate your financial progress from a macro perspective.

Conclusion

Real estate is one of the best investments that you can make. It's flexible enough to accommodate a great range of investor risk profiles and budgets. Apart from outright purchasing the property, you can participate through a crowdfunding platform or by investing in REITs.

However, just like any other type of investment, this requires careful analysis and strategy. Learn about real estate investing first to help set you on the right path. With knowledge on your side, you’ll be more equipped to identify profitable opportunities and find the most suitable strategy for you.