GUIDELINES for Real Estate Investment
17th Sept, 2015 Posted by Sohan
India is one of the fastest growing markets with major infrastructure development which has pushed the real estate supply to an ultimate high. This high supply is met with the increased demand for both residential and commercial properties and thus makes it the right time to make a REAL ESTATE investment.
If you are a first time investor, the decision to buy real estate can be overwhelming; therefore, it is important to consider a few key points before making any final decision.
Know what you’re committing to
There is no fast and easy money to be made in real estate. Investing in real estate means committing for the long term, so be prepared to be locked in for a minimum of 5-7 years.
Whether you are going to be the end user of the property or looking to invest in a rental property (residential or commercial), it is important to access the total cost of ownership, and total return. Factor in ongoing maintenance charges, insurance costs, service charges, etc. For rental properties calculate the rental yield (yearly rent divided by property price) and the total return (rental yield + capital appreciation) to see if your investment is giving you a positive return. Online tools can help you quickly calculate these returns.
Choose your investment property wisely
Location is key! A property at a prime location will give you a better return on investment over the long-term than one elsewhere. However, if prices in prime areas are beyond your reach, keep a look out for properties in new and upcoming parts of town. You are likely to find properties at fairly affordable rates in these areas that will offer a good return over the long-term.
Consult an expert
If you are not a seasoned investor, it is recommended that you seek advise from a professional before making your investment decision. Advice from an expert is going to come at a cost, however, consulting can help you save money over the long run. Look for a reputable real estate investment advisor who works closely with legal and tax experts. He will be able to help you stay within your budget, guide you through the entire transaction process, apprise you on any tax laws, and help disinvest at the right price and time.
Diversify your portfolio
Don’t jeopardize your financial well being by putting all your eggs in one basket. Minimize your risk by allocating funds between different asset classes – liquid and fixed assets. Once you’ve purchased your first property, grow your real estate portfolio and have a mix of residential and commercial properties. Also, ensure you have readily accessible savings to dip into in case of job loss or decrease in income.
Experts suggest this emergency fund should cover a minimum of six to nine months of all your living expenses. Having this fund will allow you sufficient time to look for another job or source of income without getting into an immediate financial crisis.