16 Tips on how to Invest in Real Estate



Buying a house whether for living or investment purpose is a major decision, there are multiple things that are needed to be kept under consideration. To know tips for investing in real estate as a first timer, Keep Reading

The following Tips can be used by first time investors who are new to the business of using a house for anything but living and are planning to invest in real estate.

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1. Design a Budget

Before you invest in property, it is of utmost importance to have a complete and detailed knowledge of your revenue and expense. You should contact your bank for an approval of your personal loan for investment; this will let you know how much you should borrow from a bank before you start looking for real estate properties.

2. Ongoing Costs

Be sure that you have made a section in your budget for property rates, insurance and repairs. Once you purchase your dream investment property do what you have to lower the costly maintenance costs, for e.g. replace taps that are ageing in time.

3. Growth Area

Always select a real estate investment property in the area where there is a strong requirement for rents accommodation. Try to buy a property which is close to transport facility, hospitals and schools, that will make it an attractive property for renters.

4. Investment Goals

Know whether you want a speedy growth in capital or you want to hold the property for long-term? During real estate growth periods, it’s easier to work on your properties and rent them out for a quick profit. In a bad economic time, it might take much more years to achieve the same escalation.

5. Pros and Cons

Look at the pros and cons of buying a property practically and rationally. For e.g. a house on a vertical block may give a stunning image, it can turn into a nightmare to modernize because of any excavation costs. Make sure you measure all the pros and cons.

6. Think carefully before negative gearing

If repayments on your investment loan are not fully managed by rent, your land might become negatively geared; this can give you huge tax advantages. However, it can direct to a major financial stress when you won’t have sufficient cash flow to manage the loan repayment expense, rates and/or corporate fees, so design budget carefully before buying a house. Know the expense and revenue trade off of investing in a property.

7. Building Inspection

Before approving a purchase contract of a buyer, take out time to know the building report to ignore the expensive repairs later. For e.g. you should look out for termites which can become one potential problem in your house, it’s very important that you get rid of all this before investing in real estate.

8. Right Site

Consider following things when looking to buy a house in India:

  • Location
  • Slope
  • What’s on top of the land
  • What’s underneath the land
  • Aspect
  • Depth
  • Front

9. Land Value

In some situations, the capital growth decider of a real estate apartment is the value of land surrounded in its price.

The working of this belief is simple: if a property of 20 floors is based on a land worth 4 million, every apartment will have 2, 00,000 equivalent land values and if a floor sells for 4,50,000, its land value would be 44%.

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10. Government rules

Before buying a house in a particular area, state know whether it’s allowed by your respective government to buy a house there and also seek approval if you are planning to use it for commercial purposes.

11. Market Dynamics

Find out other properties are available in nearby areas and talk to as many people residing there or the real estate dealers as possible. Getting individual information from RP Data can also provide you information on rents, value of property, demographics etc.

12. Age and Condition

Analyse how old the property is, what all renovation is required. Do all this at time of inspection, to make a better budget for yourself.

13. Renting by the room

Property investment experts’ advice on adding rental revenues by giving out your house on room wise rent.

Things to be noted before renting room wise:

Security modifications

Room wise or as a whole

 

Furnishings

Same for all rooms or different

 

Electricity & water

Same connection or different

 

Wear & tear cost

Same from all renters or independent

 

14. Yield

Work out the yield/ returns on property to know if it is a profitable deal. Most of the investors are only anxious about the property’s current return and expected yield.

Gross yield = annual rental income (week rental x 52) / property value x 100

15. Hold or sell decision

After certain years, you are supposed to make a decision of whether to hold the property for further investments or for future living; or sell it at maximum profit. Things that affect this decision are: Potential yield, future returns etc.

16. Buy more with the earnings

One of the prime decisions an investor has to make is to whether keep investing for future or stop with one property. Things that affect this are the need, risk taking ability etc.

Investing in real estate cannot be done in haste. You need to do as much as research as possible, keeping in minds your budget constraints and unexpected costs.

 

About the author: A professional writer and an avid reader, Tripti has been in the writing industry for 2 years now. Her work ranges from articles on property to education and employment. You can email her on itripti.rai@gmail.com and connect with her on twitter @itripti

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