What is the most profitable real estate investment?

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Advantages for those who have a lot of capital for long-term business

Mr. Bui Van Doanh, Director of the Institute of Real Estate Research, said that the land plot segment is still the most attractive in the future.

However, land plots are usually not for investors with limited capital or who have to borrow money to invest. Therefore, to make a safe investment, investors need to carefully study legal information, planning, liquidity as well as financial capacity.

Currently, many investors are also interested in resort land intourist cities. The Covid-19 pandemic is under control, the aviation and tourism industries will be a spearhead of demand around the world. Accordingly, the segment of coastal resort land such as QuangNinh, QuyNhon, NinhThuan, PhanThiet and Buon Me Thuot will see many opportunities.

Besides, Mr. Doanhsaid that the recovery and expansion of economic activities of domestic enterprises is also one of the main sources of demand for thedevelopment of industrial real estate in the future. However, industrial real estate is only for capital market investors with good business integration capabilities.

Along with the above two trends, the real estate market continues to record cash flows towards affordable housing products, quality and convenient apartments, residential land and private houses with legal papers and prime locations. This is also a remarkable channel for investment.

Commenting on the condotel segment, Mr. Nguyen Manh Ha, Vice Chairman of Vietnam Real Estate Association, said that the condotel market still has development potential. If investors have a small amount of capital, they should invest in following big investors such as buying condotels for lease. They hope to be able to make a rental profit and when real estate prices soar, so the value of their real estate will increase.

However, condotels are currently facing legal problems and slowing down in 2019 - 2020. The Government,ministries and agencies are completing the legal framework for this model.

High profits, high risks

Although real estate bonds are a risky investment channel, according to Dr. Can Van Luc, the corporate bond market has grown relatively quickly in the last three years, for three main reasons:

Firstly, the Government has a development orientation to this market in order to diversify medium and long-term capital sources for businesses.

Secondly, the starting point of the market is still low, currently equivalent to about 11-12% of GDP, compared with the regional average of 20-25% of GDP.

Thirdly, this is also an investment channel of both individuals and organizations with relatively attractive interest rates.

"However, in the economic rule, high profits are often associated with high risks,"said Dr. Can Van Luc.

Currently, businesses that issue real estate bonds are not unable to borrow from banks, but sometimes due to the calculation of capital structure, they can borrow a part and issue partial bonds, especially to mobilize long-term capital in the context that this source of capital from banks is still limited.

Regarding what investors should note, according to Mr. Luc, first of all, it is necessary to understand and grasp the essence of the real estate bond issuer.

After that, it is necessary to have a clear understanding of the issuance transaction, especially the conditions of interest rates, collateral, principal and interest payments, transfer conditions, transparency as well as compliance with legal regulations.

“Be careful with interest rate conditions. For example, the business promotes interest rates of up to 18% per year, it should be understood that it is not a 1-year fixed rate, but this is the maximum, actually lower. The longer a bond is, the higher the interest rate must be because of the higher risk it presents,”said Dr. Can Van Luc.

The expert hopes that the corporate bond market will continue to develop in the spirit of Decree 81, in which it is necessary to soon establish a credit rating organization for enterprises, so that investors can consult and make decisions.