Read this before buying your first property

What do your first job, first client, and first child all have in common? They're all first-time experiences you will never forget. What about buying your first property?

Man, that's an incredible feeling. You'll be elated!

Whether you're buying your first home to live in or looking for an attractive investment opportunity, such a critical decision can be intimidating.

Relax! Take a breath.

Know this: As long as you research the property and the seller, you can make the right decision. If you are an investor, then you'll need to learn about certain financial concepts, too.

Here are a few considerations to keep in mind:

Don't judge a property by its furniture

According to Nola's Essential Guide to Buying Your First Home, one of the tricks that some real estate agents use to make a run-down home look great is to give it a fast and superficial makeover! The most common industry trick is to remove everything from the property and rent furniture, flowers, and artwork! Think of it as dressing up the property before you pay a visit. As shocking as this may sound, these simple addons called "staging" can increase the selling by thousands of Dirhams! Don't be deceived by what's displayed inside. It's all just eye-candy. Remember to ignore this the next time you look for property to buy!

Calculate your NOI

Before investing in real estate, do your homework first! Investors take note: Each time you want to invest in property, you need to consider specific metrics. One of them is called the Net Operating Income (NOI). Do you know how to calculate this profitability formula? According to Crushing It in Apartments and Commercial Real Estate, author Brian Murray made it easy. Just take the income the property will generate for you in a year – all the way from rental income to parking fees and laundry machines. Take this amount and deduct annual operating costs– such as property taxes, maintenance, and insurance. You will be left with a figure, and this difference is called the Net Operating Income. This number, along with the property's Cash-On-Cash Returns (CCR), is essential.

In a nutshell, NOI = Gross Income - Operating Expenses.

Look for CCR.

When investors want to expand their portfolio, they may target investments that minimize risk. Are you an investor? Then you may be interested in properties that give you instant cash flow. Such properties are usually the least risky in real estate. In "Crushing It in Apartments and Commercial Real Estate," author Brian Murray suggests investing in properties with significant cash-on-cash returns (CCR). This strategy can increase your cash flow and diminish your risk relevant to your investments. The CCR figure can be calculated by taking the NOI and dividing it by the amount you've invested in the property in advance. Next, convert this to percentage form by multiplying this number by one hundred and adding a percentage sign after it. This percentage figure is the property's CCR. If you have a higher value, it would be better.

Try searching for the least risky investments- those that also yield an instant cash flow. Remember to do your homework first.

Consider your DCF

If you are looking to invest, you may need to know a few things about how to value real estate investment property. Like the tools required to analyze stocks, you should know the tools and methods evaluating real estate investments. In this article, we'll leave the details for another post, but here's something to consider:

One of the most fundamental concepts for valuing financial assets, including real estate, is the Discounted Cash Flow (DCF). Since real estate is not usually considered a short-term investment, it makes perfect sense to factor in discounted cash flows. DCF can assist you in realizing the value of your investment based on its future cash flows.

But what is DCF?

The idea is simple: The value of a dollar today is worth more than a dollar in the future. If you want to invest in a property, then the value of that asset is the total of all future cash flows, but you will need to discount them for risk.

If you are a serious investor, you will need to learn more about DCF, capitalization rates, and other concepts. Do your homework first before taking the investment plunge.

Filter the noise. Know what you want.

Does the market feel overwhelming with a myriad of options for everything? In his book The Paradox of Choice, psychologist Barry Schwartz argues that getting rid of consumer choices can significantly decrease anxiety for shoppers. Knowing what you want can help you achieve satisfaction. The same can be applied to property, considering too many properties can leave you more confused than ever. Eliminate too many options by using Yalla Deals' advanced filters to find what you really need!

Don't be taken for a ride. Stop being cheap and avoid this common pitfall.

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