'Buy land they aren't making any more of it' - Mark Twain
Real estate has been an attractive investment class for centuries. It has made phenomenal returns for its investors and is favored by many for a lot of reasons. It is arguably the only asset class that is indestructible. If you are a new investor and are looking forward to investing in real estate, keep in mind these five things.
- Understand All Costs - When investing in real Estate, the most common mistake people new to the industry make is thinking of their purchase price as the only cost. Real estate investment has many more fees such as maintenance, taxes, utility bills, etc. Whenever you anticipate a capital appreciation, do make sure that you account for all these expenses while calculating your profit percentages.
- Understand the Property Type - When buying any property, you must first clearly understand your purpose. Are you looking for capital appreciation, or your focus is on creating rental income. Understand the locality/city in which you are buying the property and anticipate if it has a better prospect in commercial real Estate or residential real Estate. Use these metrics to make an informed decision. If you are looking to rent out the property, then your focus should be on the type of real Estate you are buying and finding a tenant for that property type in that particular locality. For example, a specific locality might have commercial markets and so a high demand for warehouse-like properties. In contrast, another locality might have multiple colleges nearby, so a high demand for residential properties.
- Location, Location, Location - There is an old saying in real estate. The three most essential things in real estate are location, location, and location. Make sure that you visit the property and inspect it and the area yourself. The site should be easily accessible by road and be in a safe neighborhood. The property should also have access to all utilities and necessities. Take care of all the necessary things first, maybe create a checklist for the same. Once you have done that, come to the specifics like is the property road facing, how noisy is the area, etc. These things might affect the prices a lot even though it is in the same area as another.
- Stay Legally Secured - Real estate might be a safe place to invest, but it comes with its own set of worries. You must have heard of a lot of land disputes that take years to get solved and a lot of legal fees as well. Make sure that you understand all the rules and legal processes that are involved in transacting any property. Please do not take the steps lightly and follow every one of them diligently. Being wholly secured with all the required documents is the first step in becoming an excellent real estate investor. Take advice from a lawyer specializing specifically in real Estate and, if possible, also talk to someone who is in the business and happy to help.
- Think Value Addition - The best way to make good returns on any real estate investment deal is to find a way to add value to the property and then sell it for a better sale. If you can renovate the property you bought so that the look and feel of the property gets a much higher appreciation than what you spent, you might generate good profits. This is something that you will only be able to learn with experience or study. Make sure that you do not overspend, anticipating a massive rise in prices, and then get caught up because people don't value what you thought they would.
To conclude, real estate is a great place to park your capital but does come with its own set of hassles and problems. It is not the most accessible business to be in, but it certainly is a rewarding business if you can do it well. Invest in real estate with caution and make sure you remember the pointers mentioned above to make an informed decision.
(Check out 'Learn & Grow with Wizely' 'to read and learn all about the basics of investments and investment planning.)
