INVESTMENT IN CROATIA: REAL ESTATE

The old rule is that it is the best to invest about the third of the portfolio in real estate, as an investment with the somewhat lower return, but with the high level of security. Therefore, it is easy to understand the attention some economic analysts have paid to principles of investment in real estate and rules for development of investment studies.

Real estate investment value represents the maximal amount it pays to invest in it. Real estate investment value also depends on the quality of real estate, situation in the market, tax duties, as well as the situation among potential investors since the real estate value varies from one investor to the other, depending on their individual estimates. The construction assessment of the value of the project also has to be taken into account, although this is not usually harmonized with the market situation.

Besides the investment value, one should also have in mind the return of invested capital rate (ROI), which is influenced by total expected profit, investment dynamics, taxes and forecasted return period. By relating the expected rate of the return of invested capital with the desired result, we will come up with the level of risk of the entire project, which is the key information on the basis of which is made the decision on what investment it is advisable to select among several options-

As we have already said, the objective of each investment is to boost up profits through one of the listed options, but in the process we must not ignore numerous restrictions that can jeopardize the entire investment. So, for example, there are .numerous legal restrictions that can prevent the construction of an object although the results of the investment study have shown high project profitability. Cultural differences are also one of the factors that can prevent sales or rent of a well constructed real estate, if the planned construction style is unacceptable for the local community. Personal attitudes also can influence investor's decision in case the investment, no matter how profitable, opposes some of investor's personal principles. The over exaggerated fear from risk often paralyzes some very profitable projects, as well as the possibility to select among several different options. We will be able to forecast all listed types of risk, if we properly identify possible fluctuations in the flow of cash, the amount of which is commensurate with the level of risk.

This document originates from www.investments.hr website.

BROKER, real estate agency team.