A smart investment has the potential to change our lives, providing us sufficient funds to live our dreams. There are so many kinds of investments for profits like stocks, gold, bonds, government schemes, etc., but one of the most underrated or ignored investment in recent times remains to be real estate. Given the huge economic boom in most Indian cities, that adding incentives to invest for the future and real estate could be the ideal investment choice.
Fact that prime real estate never loses demand or value, investing in it can be a great move, offering returns far higher than traditional investment options. Given the shortage of land in cities across the country, purchasing even a small flat can offer you returns in the form of rental income or by selling it for a profit.
POINTS TO CONSIDER BEFORE INVESTING IN REAL ESTATE
Real estate investment comes with certain risks and a beginner should keep the following points in mind before spending his/her hard-earned money.
Stay Patient
Buying a property is a time-consuming affair, with most genuine property transactions taking a few days to be complete. While a number of real estate firms offer to complete formalities overnight, the fact remains that exhibiting patience can help you land a good deal. Quick decision makes you to more for the property, which doesn’t live up to your expectations.
Research The Property
Research as much as you can before you step out to look for a property is critical today. With a number of projects coming up, it can be confusing to choose the right real estate. The amenities on offer, the history of the construction company, the materials used, the area a property is located in can all play a role in determining the returns you get on your investment. Failing to research before buying could see you regret later, negating your investment.
Check The Papers
The papers of a property are perhaps the most important factor one should consider. it is possible for someone who is not acquainted with the real estate industry to get scammed into buying a property with fake papers. Buying a property without clear titles can lead to long drawn court cases or litigations, which nullifies the investment. All papers should be checked by legal experts to authenticate them, for failure to do this lead you purchasing a property that creates controversy.
Check Market Rates
Knowing the market rate can help you track local trends, ensuring that you don’t get scammed into paying a higher amount than what a property deserves. Researching market rates and working out developments could help you to make impact on the returns you could expect in the future.
Talk To Neighbours
Talking to the neighbours can help you get a first-hand perspective of how things are in a locality, helping you narrow down any problems or areas which could dilute an investment. Talking to them can also help you know the current market rates and see how the area has developed and the scope for future development. Fact that neighbours aren’t salesmen trying to sell you the property, one can get a clear picture of the real estate they intend to buy.
Calculate Your Finances
It is important to calculate the finances you have, to ensure that you meet certain goals. While it is easy to get loans from banks, calculating the interest and other factors is crucial.
Remain Positive
It is important to stay positive while executing a real estate deal. Remaining calm and composed while interacting with property sellers can help you get additional benefits.
Negotiate
Negotiations are a key aspect of the Indian real estate system, as everyone is looking for a deal which will make them richer. Knowing the art of negotiation can help you save a lot of money and get additional freebies like parking spaces, furniture, etc.
Consider The Risk Factor
Real estate investments are typically safer than other investments, but that doesn’t mean they are totally risk free. Legal hurdles and property disputes are extremely common in India and should ensure that the property you are interested is free from all hassles.
Owning a property can be the smartest move given the changing dynamics of our times, and keeping these simple points in mind can point a beginner towards the right path to investing in real estate.
Here are the most popular real estate investment methods:
Rental properties
Rental properties are the top most option in this list. You buy a piece of residential or commercial real estate and rent it to tenants. Many rental properties are rented for 12-month periods, but shorter-term rentals are also becoming more popular as well.
As the property owner, you are the landlord. You’re responsible for upkeep, cleaning between tenants, big repairs, and paying property taxes. You make money off rental properties from the rental income you receive from tenants and price appreciation if you sell the property for more than you paid for it. When you buy rental property using mortgage and if you charge enough rent to cover your mortgage payment, you’ll get the rest covered by your tenant.
REITs
If you don’t want to put up with the headache of managing a rental property, real estate investment trusts (REITs) are an easy way to start investing in real estate. REITs are publicly traded trusts that own and manage rental properties. They can own anything: medical office space, malls, industrial real estate, and office or apartment buildings, to name a few.
REITs are required to pay out at least 90% of their net income to investors. If the REIT meets this requirement, it will not have to pay corporate taxes. Additionally, while selling a rental property could take months and lots of paperwork, a REIT has the advantage of liquidity since they trade on stock exchanges.
Real estate investment groups
Investing in a real estate investment group is one way to keep the profit potential of rental properties. REIGs purchase and manage properties and then sell off parts of the property to investors. A REIG will buy something like an apartment building, and investors can buy units within it.
The operating company retains a portion of the rent and manages the property. This means the company finds new tenants and takes care of all maintenance. The investors will also pool some of the rent to keep paying down debt and meet other obligations if some units are vacant.
Flipping houses
Flipping houses is the most difficult and risky of these options, but it can be the most profitable. The two most common ways to flip houses are to buy, repair, and sell, or buy, wait, and sell. In either case, the key is to limit your initial investment with a low-down payment and keep renovation costs low. Keeping renovation costs to a minimum may sound easy, but it may be nearly impossible if you don’t have direct construction experience.
If you choose to flip houses, be smart and figure out a way to sit it out when the market gets too hot. It may seem counterintuitive, but it’ll save you in the long run.
Real estate limited partnerships
Real estate limited partnerships (RELPs) are a form of REIG. RELPs are structured similarly to hedge funds, where there are limited partners (investors) and a general partner (the manager). The general partner is typically a real estate business that takes on all liability.
RELPs are a more passive investment in real estate. Typically, the general partner sets up the partnership and recruits’ investors to be limited partners.
RELPs can be very profitable if you find a good general partner. But you’re relying totally on that general partner who must, without much oversight, manage the property will backfires to you.
Real estate mutual funds
Real estate mutual funds or exchange-traded funds (ETFs) are the simplest ways to invest in real estate. You allow a manager or even an index to choose the best real estate investment while you collect dividends.
Even if you’re a stocks-only investor, consider using real estate funds to get diversification while keeping the liquidity profile you’re used to.
