10 Important Factors to Evaluate Before Making Investment Decision 2024

Blog June 2024

Investing, be it through real estate or in listed companies on the stock market demands a proactive approach centered around due diligence and a thorough scrutiny of the financials.

Investors who are able to evaluate investments based on well-rounded market research and thorough due diligence increase their probabilities of a profitable outcome as a result of their investment decisions.

Our detailed guide will help you master the art of making astute investment decisions by embracing 10 factors that will help lead you toward profitability.

Factors to Consider When Making Investment Decisions

 

1. Define your Investment Goals & Ambitions

 

At GCG Real Estate, we don’t believe in one-fits-all solutions because every investor is unique in terms of their financial situation and investment goals. Every investment strategy or decision you make is unique to you, your circumstances, and your underlying investment aspirations. 

So, instead of blindly embracing a strategy that worked for someone else, it’s crucial to define your goals and probe deeper into the reasons encouraging you to make an investment decision. Setting clear objectives of the utmost significance, as your goals will serve as a roadmap to help you arrive at the right investment decision to support your ambitions.

 

2. Prioritize Market Research

 

We simply cannot stress enough the importance of assessing available financial information, while also getting an understanding of wider market research, trends and predictions which will help develop your market savviness. 

Financial markets can be volatile and subject to external economic forces, and it’s through  researching a market’s dynamic that can help you protect against adverse swings.

Fundamentally, the more understanding you have about a particular market, the better your investment decisions will be—market research serves as a guiding compass steering you to make better investment decisions.

As you explore sources, consider the following strategies:

  • Rely on credible educational sources. 
  • Scrutinize the expertise and validity of each source.
  • Rule out conflicts of interest and potential biases that can impact the available information.
  • Emphasize the importance of seeking diverse perspectives as you navigate the pool of market research.
  • Be sure to corroborate information from various reputable industry-specific sources to form a well-rounded market understanding.
  • Beware of influencers, investment or business coaches selling programs and short courses that might lead you to make an unfavorable investment decision.

Factors to consider when making investment decisions

 

3. Assess your Risk Tolerance

 

Assessing and defining your appetite for risk is one of the foremost steps to undertake as you strategize your investment decision. Every decision and investment opportunity carries a different risk, and it’s crucial to assess your risk tolerance before getting involved. 

Ultimately, your risk tolerance and financial situation should dictate which investment decision you can take and which opportunities you need to let go. 

For instance, investors seeking to secure their principal investment should begin with a low-risk investment decision that may not guarantee high returns. Investors can make riskier decisions when they understand their risk threshold and learn how to evaluate the performance data of their investments. 

Setting realistic expectations using data-driven insights is crucial to avoid emotional decision-making and navigate losses with confidence.

 

4. Define the Investment Timeline

 

Your investment timeline will define your investment strategy and subsequent decision making. Having a clear end goal for your investment within a realistic timeframe will help transform your financial ambitions into realistically achievable milestones.

Typically residential real estate investors find long-term buy and hold strategies yield better returns with benefits including regular rental income and assets being less susceptible to price fluctuations over a longer period. But if you’re just starting out and want quicker, larger returns, you might use a short term fix and flip strategy to achieve your goals.

At GCG Real Estate our experts advise you on the right strategy, and timeline to meet your investment goals.

 

5. Handling Legalities and Taxation

 

All investments will come with a myriad of tax obligations, which must be addressed in order to avoid legal complications in future. 

As you evaluate investment opportunities, be sure to enlist the services of a trusted accountant or legal professional who will be able to advise you on your tax and legal obligations in investing.

At GCG Real Estate, we have tax and legal experts on hand to help you make smart investment decisions.

Handling legalities and taxation

 

6. Partnering with Competent Professionals

 

Professional expertise and support are crucial to help you arrive at the right investment decision that aligns with your financial situation, aspirations and risk appetite. 

When exploring the market, it’s important to be wary of unrealistic promises and guarantees. Remember, if an offer sounds too good to be true, it probably is.

Don’t make professional relationships based on empty promises, and unrealistic returns – no matter how good they sound! Instead prioritize expertise and a track record of success. And always do your research and due diligence!

At GCG Real Estate, we’re seasoned experts who prioritize client interests above all and help our investors navigate a wealth of lucrative opportunities while keeping their goals at the forefront.

 

7. Explore Affordable Investment Vehicles

 

Every sector has an array of investment vehicles to suit any budget and/or investment stage. As an investor it’s vital to understand and choose opportunities that fit with your expectations, timelines, and above all financial readiness. This sets the stage for sustainable and steady returns without exposing your portfolio to excess risk. 

A good example of an affordable investment vehicle that fits any budget is Section 8 housing. With its low risk profile and government backed rental income, affordable housing, when chosen wisely, opens up a wealth of promising returns from US real estate opportunities.

At GCG Real Estate, we specialize in Section 8 housing investments which are a pillar of our investment strategies when advising clients on how to diversify investments and safeguard their wealth.

 

8. Analyze What Makes a Good Real Estate Investment

 

In order to analyze the profitability potential of a real estate investment opportunity, investors can explore multiple frameworks that examine crucial components for a well-rounded investment decision.
One such framework is the Real Estate Diamond Framework, created by Harvard’s Professor Arthur Segel. This framework analyzes investments based on four factors – external environment, capital markets, product and people.

what makes a company a good investment

Product 

In the context of real estate, product refers to the property and the land, and investors must prioritize physical inspections to assess the overall value of the investment. During inspections, investors need to scrutinize the infrastructure’s structural foundations, such as the floor plan, walls, and design flaws. 

Investors also need to examine existing signs of damage, particularly concerning the key systems such as electricity, plumbing, heating and cooling. The physical location of the property needs to be examined to ensure the presence of a well-connected ecosystem that offers transportation, entertainment and other modern amenities.

People 

The Real Estate Diamond Framework emphasizes the need for establishing positive relationships when investing in a multi-family building or even a suburban home to enjoy flexibility in the deal structure. 

These people include lawyers, neighbors, contractors, inspectors, and architects. The people vary, depending on the kind of property you’ve chosen, but at the end, positive relationships make this business flourish.

External Environment 

The external environment refers to the forces that investors cannot control, such as the regulatory environment, interest rates, economic slowdowns, area-specific demographic trends and natural disasters. It’s crucial to consider the external environment and analyze how it will impact the short and long-term profitability of your investment. Such occurrences create challenges when investing in real estate.

Capital Markets

Capital markets refer to the channels through which investors acquire funding to invest in their chosen vehicles. These markets are subject to multiple forces, including the market structure, investment trends and federal and state laws. Investors will find multiple capital markets available to them, but they must find the right funding source that aligns with their current financial situation and future ambitions.

 

9. Assess the Market Volatility

 

Assessing the market volatility of your chosen market will help you make a profitable investment decision by examining returns on investment and asset appreciation. 

Assessing market volatility allows investors to account for price fluctuations that occur over a period as they scrutinize their investment decision. Volatility should be a key consideration guiding your investment decision to secure the returns you aspire to achieve.

 

10. Don’t Put All your Eggs in One Basket

 

Diversifying your portfolio will protect you against risk, and support greater returns while providing more stability. When it comes to making a pragmatic investment decision, the age-old saying of putting all your eggs in one basket is always a mistake. At GCG Real Estate, we strongly believe in diversification to create a balanced investment portfolio.

 

Final Thoughts

 

Enlisting the support of  seasoned professionals to support your financial vision will help you make an investment decision that aligns with your short and long-term goals. At GCG Real Estate, we’ve empowered our investors by equipping them with the resources, knowledge and knowhow to build lucrative and profitable portfolios.

Through our specialization in Section 8 housing, we serve clients seeking security and stability in their investments by offering opportunities to build a portfolio of assets offering regular rental income returns, and profitable exit strategies. 

Keen to know more? Book a free consultation with our team to learn more about investing with us.

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FAQ

Any questions

What is affordable housing?

Affordable housing refers to housing units designed to be accessible to low- and moderate-income families, typically costing no more than 30% of their gross income.

The definition of “affordable” typically varies depending on location and income levels but generally encompasses rent or purchase prices that don’t exceed a certain percentage of a household’s income.

What is Section 8 housing in the US?

Section 8 is a federal rental assistance program in the US run by the Department of Housing and Urban Development (HUD) that helps low-income families and individuals afford decent and safe housing in the private market. 

The program provides eligible households housing choice vouchers that cover a portion of the rent directly to the landlord, with the tenant paying the remaining amount. Property owners who participate in Section 8 agree to rent units to qualified individuals and families at a rate approved by the program.

How can I invest in Section 8 housing?

There are several ways to invest in Section 8 housing:

  1. Direct ownership: You can purchase a property approved for Section 8 and rent it to a qualified tenant using a voucher and receive rent subsidized by the government.
  2. Real estate investment trusts (REITs): REITs pool investor funds to purchase and manage income-producing real estate, including affordable housing.
  3. Limited partnerships: Limited Liability Companies (LLCs) offer another option for investors to pool resources and invest in affordable housing projects.
What is the difference between multi-family and single-family properties?

Single-family property: This refers to a standalone house or unit designed for and rented to one household.

Multi-family property: This refers to a property containing multiple dwelling units, such as a duplex, apartment building, or condominium complex. Multi-family properties offer the potential for higher rental income but typically require different management strategies and considerations compared to single-family homes.

What is the difference between buying and flipping houses?

Buying and holding: This involves purchasing a property to keep it as a long-term investment, generating rental income and potentially appreciating in value over time.

Flipping: This involves buying a property, renovating it to increase its value, and then selling it quickly for a profit. This is a more hands-on strategy with higher risks and rewards compared to buying and holding.

How much do I need to start investing in affordable housing real estate?

The minimum investment required varies depending on the chosen method. Direct ownership typically requires a higher initial investment for the property purchase, and renovation up to Section 8 standards, while other options like REITs might have lower minimum investment amounts.

Do I need to be a US citizen to invest and own the property?

No, US citizenship is not a mandatory requirement for investing in affordable housing in the US. However, specific restrictions or regulations might apply depending on the investment method and your residency status.

It’s crucial to consult with a professional to understand the legal and tax implications for non-citizens.

Do I need to pay US tax as an overseas investor?

This depends on the type of investment, your residency status, and any applicable tax treaties between your home country and the US.

Consulting with a tax professional specializing in international investments is highly recommended.