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Build or Buy: The Pros and Cons of Investing in a New Development vs. an Existing Property

We live in a time when urban development is constant, and existing buildings constantly accumulate all around us. With all the opportunities to build from scratch or buy into an existing property, it can be impossible to settle on an informed decision about how to invest in real estate.

For those struggling with decision paralysis, we’ve prepared this guide to the pros and cons of building and buying investment property. In this article, the costs and benefits of new developments versus existing properties will be made clear. After reading, you should be ready to decide on the best form of real estate investment for you, and be fully prepared when launching into your next venture.

New Investment Properties: The Pros

building-community-new-apartment-architecture-competitions-books-architecture-_dezeen_hero-a.jpgSource: dezeen.com

An obvious choice for real estate investment is putting your money into new properties with high potential income from tenants who like their spaces new and modern in design. That’s logical, but it isn’t the only reason to invest in new developments.

Newly-built properties expose you to fewer costs in the form of maintenance. Since they’re new, your earnings won’t be diluted by repairs, maintenance, or other costs associated with keeping a building safe and ready for habitation. When everything from water to electricity is brand new, it’s all covered by warranties. If anything goes wrong, your cash flow will be compensated.

Modernity appeals to investors and tenants alike. New homes will cost a premium over older properties. But people are willing to pay extra to live in the new. The steady growth of those people will mean more tenants, and more income down the line.

You might not be sure your property will earn its value back.  Crazy as it seems, that’s an advantage! Because if you aren’t sure your property will earn its full potential value, you can benefit from the sweet depreciation benefits of an uncertain future. Since full return of investments aren’t definite, you trade that off with tax benefits by paying off its real value over time, instead.

New Investment Properties: The Cons

However, to reap those rewards, you have to pay the price, first.

That price is the cost of entry, and for new homes, it’s higher than average. You don’t just have to compensate the agent in charge of the property, but also the builders who put something in that property worth living in. That price might turn you off when the overall cost is something too high in today’s market.

Aside from the cost of entry, you have assess the overall value of the property. Why? You won’t always have the capital to make physical adjustments to increase it. Its initial value will usually remain the same for a long time, meaning low opportunity for further capital growth.

So, you’ve judged the property’s value, paid the cost of entry, and are waiting for the property to be liveable. What happens then? Construction takes time, and that time means stagnant income potential. You need to time your investments wisely, because income potential is tied while building. It’d be an overall loss if construction finishes, but the market values your property less than before.

Once your investment stands tall, remember that it’s standing against competition in every direction. Modern properties appeal to everyone at face value, so you’re going to have to compete against plenty of other real estate investors that had the same or better ideas as you.

Existing Investment Properties: The Pros

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Source: flickr.com

“If it ain’t broke, don’t fix it”. But if it is broken, with effort, anything can be fixed up to benefit you more than it originally could’ve. Don’t worry about being afraid to invest in new properties, because old properties are just as worthwhile a venue to put your money in.

You have the power to boost the equity of your chosen property. The magic of renovations to an old structure is their potential to upgrade a place’s utilities and amenities, all while being tax deductible. Your money goes directly towards increasing the value of your investment.

And since the property initially won’t be worth much, you have a more affordable cost of entry compared to new developments.

The property itself might not have a significant, explicit value, but remember the basic rule of any potential investment: location. Most likely, the reason the property exists is that it’s placed somewhere that sees a lot of attention and activity. And those two can only grow.

By the time you invest, the property will most likely be in a noisy, kinetic area, and people will want to rest their feet somewhere. With that concentration of people looking to settle, you get quick and reliable projected returns from the basically certain tenants’ rents.

Existing Investment Properties: The Cons

Of course, those rewards require time and effort. Renovations are an initial expense, but maintenance and repair will be more expensive compared to new developments because of aged utilities and systems. Some of your cash will be diverted towards the parts of your property that are inefficient or not easily rehauled.

An already-built property means you’re limited with design and remodeling choices. If you’re intent on boosting your equity, there won’t always be a pool of possibilities for you to fish from. You could always try partial deconstruction, but that’s basically the same problem as with new homes: stagnant time, stagnant income. Think carefully if the property you choose has potential past what it’s already been through.

Conclusion

Should you build or buy? It all depends on you! A new development is risky, but the return of investment will be premium and there’s greater compensation for your gambles. Existing homes take work to compete with modern options, however the income earned will be sure and consistent.

What you invest in will reflect if you’re entering the landscape bravely or wisely. But what matters is your willingness to take that first step into the world of real estate investment.Curious to learn more about the world of real estate investing? Visit us at BitOfProperty for the lowdown on real estate, investing, and everything else in between.

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The Top 3 Investment Trends in 2019

The world’s analysts are on edge as 2019 shifts into gear, and for a good reason: last year showed 90% of all asset classes on the market posting negative returns. This is in stark contrast to data on the same metric in 2017, which saw a mere 1% of asset classes ending in the red.

With some calling 2018’s market performance the worst it’s been in a century, the question on everyone’s mind is, Where should I place my money in the year to come?

As early as now, a handful of investments are poised to do well this 2019. We’ll run through the top three of them, exploring their history as investment opportunities as well as the factors that lend to their upward trajectory.

1. Pot Stocks Are On The Rise

With marijuana legalization sweeping North America, and Democrats holding the US House of Representatives, things are looking bright for the cannabis industry and stocks in related companies. As federal-level legalization of recreational marijuana begins to look like an eventuality for many in the United States, companies are vying to establish a foothold in the emerging market, with investors keeping a close watch on developments.

Unlike other fledgling industries, medical and recreational marijuana have a significant cultural head-start, with high levels of demand being a foregone conclusion. You needn’t look much further than California pot company MedMen (MMEN), which reported $6 million in sales for 2017 –and this is without an infrastructure for delivery and in-house pickup.

Today, all signs point to significant growth for the industry. As early as mid-2018, investors have been sifting through the set of new “pot stocks,” hoping to catch the next Amazon-esque success story. Notably, firms such as Canopy Growth Corp. (CGC), Cronos Group (CRON), and Aurora Cannabis (ACB) entered the year on a promising note.

While the industry is bound to face the same growing pains as any newcomer, few products have had as much pre-existing demand and access to sophisticated tools for marketing, logistics, and payment collection. Effectively, marijuana is today what beer was at the end of prohibition; with 2019 as its backdrop, expect pot stocks to take the market by storm.

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2. Artificial Intelligence Will Be An Intelligent Investment

Artificial intelligence (AI) is the field of technology that deals with building computers that can perform the same set of complex tasks as the human brain. Instead of straightforward, programmer-assisted functionality, AI aspires towards more independent machines that can learn and adapt to large amounts of input.

AI isn’t a new concept, but recent years have seen a boom in its development and implementation. Advances in data science, neural network programming, and microtechnology make unassisted machine learning a promising new reality.

One of the more visible deployments of AI in recent memory would be Tesla’s self-driving cars. The company’s entire fleet of vehicles comes equipped with sensors that send data to the cloud, and this data is used in turn to refine their cars’ ability to navigate and respond to conditions on the road. In line with its tradition of putting data analytics at the heart of their business identity, Tesla’s approach to AI aspires to minimize the role of programmers in process.

While there are many pretenders using outdated tools and claiming involvement with AI, companies like Nvidia (NVDA), Apple (AAPL), and Alphabet (GOOGL) can be reliably counted among the pioneers in AI development. On the other hand, companies such as Netflix (NFLX) and PayPal (PYPL) lead the charge in terms of applying AI to their product lines.

As an interesting note before closing this item on the list, the data that powers AI shows just as much promise as its end product. Researchers at McKinsey and Co. speculate that the market for data generated by electric and self-driving cars could hit a $750bn yearly value by 2030 –a hefty sum for a pile of 1’s and 0’s.

3. American Millennials Will Propel The Housing Market

Despite mortgage rates that are expected to rise in the year ahead, analysts speculate heavy demand for homes among millennials in the US. The generation is noted for preferring mobile lifestyles and rental models over all-in property investment, but those old conclusions bear scrutiny now that the rate of young and first-time homeowners is experiencing an uptick.

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The increase in millennial homeowners owes to a variety of factors. First and foremost is the simple matter of time: the millennial demographic is growing older, getting married, and nearing the point where settling down and investing in a single asset makes financial sense. With age also comes career advancement, and therefore an increase in purchasing power: more millennials can simply afford to play the housing game.

These are coupled with the number of mortgage lenders experimenting with friendlier lending policies and the big changes expected from the new UltraFICO score to make optimism in the US housing market a fair bet.

Make no mistake: millennials are still the same disruptive demographic as ever. The trend is significant, but it doesn’t upend years of market data and survey results. So while this won’t diminish the rental market by any means, real estate investors would be wise to keep an open mind to traditional housing.

For those who choose to invest in millennial housing, the same rules also apply. Your investment would go best with an agent or strategy that taps social media for reach and awareness, satisfies a market that knows how to do its homework, and gets creative with matching their doable price point.

Conclusion

2018 was quite the ride, and 2019 will likely be no different. Stability is hard to come by in today’s economic and political landscape, but as with any period in history, opportunities abound for those with the savvy to spot them.

While an upswing is highly likely after last year’s dismal performance, some trends are too promising to ignore. This is by no means a definitive list, but the three trends we’ve outlined above are worth following with interest.

Call to Action: BitOfProperty works with blockchain technology to empower investors of all sizes to buy into affordable shares of real estate around the world. Learn more about what we do by clicking here, and see how we fit into a future-proof investment plan for 2019.

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Meet BitOfProperty in Helsinki

BitOfProperty is organizing an event in Helsinki to give better insight and overview of a current real estate investment opportunity, DepotHouse. We will also cover the situation of current real estate investment market in Tallinn.

The event will take place on 31.10.2018 at 17.30 in Nets building (Teollisuuskatu 21, 00510 Helsinki).

Topics covered during the seminar:

  • About BitOfProperty
  • Real estate market situation in Tallinn
  • General information about DepotHouse investment opportunity
  • Introduction to the developer Koidu Ehitus OÜ
  • Structure of the opprtunity
  • Location of DepotHouse
  • Investment case and various scenarios

Light snack and drinks are complementary by BitOfProperty!

Come join other likeminded real estate investors in Helsinki by signing yourself up HERE

In case, you are unable to join the event on the spot, but you are interested to participate nevetheless, then please let us know via email, team@bitofproperty.com, and we will do our best to connect you via Internet.

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Looking forward to see you at the event!

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Webinar #2 BitOfProperty: Why investing in DepotHouse is a good idea?

After a successful start of our webinar routine, we are happy to announce that Webinar #2 is just around the corner.

During the second webinar, our Co-founder Taavi Pettai will present to you in depth our current ongoing investment opportunity DepotHouse. Investment project with stable passive income guaranteed for the first 24 months in which you can invest starting from as low as 50€.

Topics covered will include the general information about the building, location, its developers, reasons to invest and returns on investment. Additionally to that, Taavi will give a small overview of the market, timeline and exit strategy, structure and security of the investment.

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During our second of the three webinars -“BitOfProperty: Why investing in DepotHouse is a good idea?” you will be able to ask any questions regards the ongoing deal and make sure everything is clear in case you wish to invest. Webinar will go live on October 9broadcasted at 10:00-11:00 Estonian Time (GMT +3). CLICK HERE to access the LIVE stream.

Don’t forget to inform us that you are interested in joining the live stream by sending us an e-mail to team@bitofproperty.com, as well as questions you would like to answer us during the LIVE stream.

P.S. If you wish to see the previous webinar “BitOfProperty: Property investing made simple. DepotHouse deal.” the webinar is accessible HERE.

 

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Real estate seminar 2018. First visit to DepotHouse. Throwback to BitOfProperty’s weekend.

During the weekend BitOfProperty attended “Real Estate Seminar 2018” in Tallinn, as well as had first tour trough DepotHouse.

Starting the weekend with a tour trough DepotHouse, which is currently in the development process with an estimation date by the end of the year. BitOfProperty members together with other property visitors had the chance to see the first sample apartments of DepotHouse, how far the development process has gone and have the chance to visualize how the property would look like when it would be finished. BitOfProperty got confirmation that everything is on schedule and the ongoing deal is following its plan.

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BitOfProperty’s Sunday was occupied by real estate seminar. Seminar was attended by people interested in investing in real estate, while the speakers of the event were professionals from all sorts of different parts of real estate industry. Topics covered at the seminar where legal and taxation aspects of real estate investments. Overall real estate market situation in Estonia and the ongoing trend of small investment apartments, as well as case studies of existing developers and their rental properties. One such speaker was a representative from Koidu Ehitus, developers of our current ongoing deal DepotHouse who was giving an overview of project’s existing development phase, investment opportunities and properties characteristics.

Productive and qualitative time spent for BitOfProperty. Keep tuned for more information about real estate market and our ongoing deal DepotHouse.

 

 

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Webinar #1 BitOfProperty: Property investing made simple. DepotHouse deal.

It is important for any active investor to keep their portfolios diversified, but is real estate investing the right way to go?

Real estate investing can be a good source for passive income and one of the ways how to build up your wealth over the long run. At the same time it might seem that property investing requires a lot of money up front, or it is expected to have a lot of ongoing work after investing.

No doubt, that some part of that is true, but recent time has shown that there are new approaches that simplify the real estate investment process. One of such approaches are provided by BitOfProperty, a real estate investment platform, giving people the chance to invest in properties starting from smaller amounts. With its easily accessible and transparent platform, BitOfProperty provides competitive market opportunities that are typically not available to general public.

This and so much more will be presented to you during the first of the three LIVE webinars – “BitOfProperty: Property investing made simple. DepotHouse deal.” on September 14, making sure that BitOfProperty is the right way for you to invest in real estate properties. Webinar will be broadcasted at 10:00-11:00 Estonian Time (GMT +3). CLICK HERE to access the LIVE stream.

Topics covered:

What is BitOfProperty and how it works? 

Why BitOfProperty is the right way to invest in real estate? 

How is it different from other real estate investing options? 

Our ongoing deal DepotHouse and its charectaristics 

Investment returns of DepotHouse

Don’t forget to inform us that you are interested in joining the live stream by sending us an e-mail to team@bitofproperty.com, as well as questions you would like to answer us during the LIVE stream.

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Everything you wanted to know about BitOfProperty, but were too afraid to ask

Our new investment opportunity DepotHouse is out, great! Seems appealing, but how exactly investing in properties from BitOfProperty platform work? Getting started with BitOfProperty requires just a few steps, here’s how it works:

Sign up

To create a free account, simply click on the „Sign up/Log in“ page and provide us with your full name, email, and password. Next confirm your email by clicking the link in the email received, and your personal BitOfProperty investment account is made!

Profile verification

Profile verification is a mandatory procedure needed for „Know Your Customer“ (KYC) purposes to help us identify investors and assess any potential risks of illegal intentions such as money laundering. Users will not be able to invest nor transfer funds to their account until their profile is verified. Once you have provided us with your details, we will send you an email regarding whether the verification was successful or not.

Properties

We source our properties from individuals, real estate agents/brokers, advisors and key partners, giving you the opportunity to invest in both residential and commercial properties. BitOfProperty will do thorough due diligence process for all properties in order to make sure only the best ones are put on the platform. The process includes a technical inspection and financial calculations to understand the condition of the property and estimated returns. Each individual property page has information about the particular project that will serve you as guidance to making your decision regards to investing.

Add Funds

As mentioned, users will be able to start transferring funds to their wallet once a successful KYC procedure has been carried out. Then you can deposit money by clicking „Add funds“ on the platform’s header. You can always track your funds, money invested, income received, and reserved investment amount by clicking on the „My Wallet“ page. 

Invest

When you make an investment, your share will be calculated by dividing your investment amount with the total investment amount. All purchases are held in line with industry best practices and transacted across the Ethereum Blockchain providing immutable record of ownership and bringing more safety and transparency to the deals. You can always track your investments on the „Dashboard“ page. Additionally, BitOfProperty will send you monthly updates on your investments.

Receive income

According to the share you own, you can expect to start receiving monthly rental income after the first month once the property is bought, as well as  at the end of the investment term once the property is sold.

Still seems too confusing? Contact us team@bitofproperty.com or look up our team members individually – we will make sure all your questions will be answered!