Roti, Kapada and Makaan (Food, Clothing, Shelter)

There are three essential needs that every human being must meet. He must eat healthy food and wear clothing to keep himself comfortable from heat and cold. Once these two basic needs are met, everyone longs for a home or shelter of his own. Many rented properties don’t offer the same sense of security and belongingness as a home. Although owning a home is easier than it was a few decades ago, the many issues that homeowners must deal with still make buyers nervous. You must be careful with every step you take in this direction. A slight mistake can ruin your finances and haunting you for many years.

It is fascinating to see that real estate is the largest single investment most people make in their lives. This makes it an important, if not integral, part of any financial portfolio. The dream of owning your own home is where savings accumulate over time. If you don’t know what you’re doing, these savings could disappear in seconds. People spend long hours at work and often feel frustrated when their hard-earned money evaporates.

As many people realize, investing in real estate is not a difficult task. Real estate can be very lucrative, regardless of whether you’re looking to buy your home or invest in return.

So let’s go ahead and see how and when people should invest in a property or speculate

How much appreciation can you expect in real estate?

Real estate investing is not a one-size-fits-all approach to return. Property markets can go through both positive and negative cycles. However, values rarely drop. Sometimes, they don’t rise for several years. They usually appreciate in value .quickly from a low base when bought at lower prices or in mid-level and affordable housing. Higher-value/premium properties appreciate at lower rates. Although you will pay more to purchase a large premium property, you will likely find it more difficult to find buyers if you are considering an exit strategy.

Investors who can see a rising market and then sell when it reaches their realistic appreciation benchmarks are the best. You can assess when it is time to sell if you keep an eye on your investments. It’s a smart idea to look at the past property values in your area. You can assess the trends and rates over time to see how property values have performed in the past and then predict how they will perform under similar circumstances

 Invest according to your risk appetite

Purchasing an office property is possible  in any one of these stages:

1. If the building is in construction

If construction is complete, but the property remains vacant,

2. Once the building is ready to be occupied.

A property in construction has the advantage of a low purchase price. This stage of construction could offer the best price appreciation. This stage comes with the greatest risks. Your returns could start arriving from a later date than you expected. The builder might not finish the project on schedule. The quality of the product delivered may be in doubt. Risks can be mitigated by choosing a well-respected developer.

You run the risk that the building will not be occupied when you invest. If you do find a tenant, his rent may be less than what you expected. You have a lower risk of losing capital, but the building will be occupied.

Investors who are most willing to take on high risk should invest in the first stage. Investors with a lower risk appetite should invest in the third. You should invest in occupied properties if you want to generate rental income. However, if you are looking for capital gains, you should consider a Greenfield property. Conservative investors should consider an occupied property.

Do your research before you invest

Prioritize the location, as with all real estate transactions. Consider the economic factors that are important to the area. Make sure that your building has access to water and electricity. It will impact your ability to rent out your building and your ability to find tenants.

Avoid investing in remote areas that are not connected to the highways when you’re looking for suburbs. Also, the infrastructure surrounding the area, including internal roads, must be in good shape.

Next, you need to consider the quality of the building’s construction. You may only find a few reputable developers who are developing office properties in your area. The location will determine the range of options available.

Ask around about the potential rental return from the building. Learn about the area’s popularity and how many tenants are in the area. What will be the timeframe for another tenant to move in if the tenant moves on. If the property is already occupied, ensure that the tenant owns a growing and profitable business. This will prevent the property from becoming vacant early. You should also read the lease agreement. A lawyer can review it if necessary. It should at least have a lock-in time.

Real Estate Investments: The Drawbacks

Liquidity. The main risk of real estate investing is the slow pace at which you can get money. It is an illiquid asset. In an emergency, your real estate investment does not fetch money immediately. Even if it is considered, the asking price will be bargainable with the distress factor in the picture. 

Scams and Frauds – Real estate is a risky investment. Fraudsters may make false documentation of property and sell it to multiple buyers. This is especially common for open plots, which have no identification of ownership. Many fraudsters steal money and disappear overnight. Sometimes, illegally occupying of the property in another city, especially if they pose as tenants or property owners, can lead to the loss of your money. Some scammers might try to sell you properties that have been placed on a temporary stay/dispute. People have had to sign and sell their property only for the payment cheque to bounce, and only a portion of it has been paid for.

Delays in projects: It is possible that the builder does not finish the project within the deadline. The buyer may suffer losses, including additional interest on the mortgage and additional rent payments.

You will need to invest more: This is certainly more costly than other investments like bonds or gold.

Although property prices can fall, long-term returns can be high. Property generally has good returns for 25 to 30 years, just like shares. Like other asset classes, real estate experiences ups and downs. It isn’t as volatile as stocks and gold, but that is the only difference. Some markets have seen property prices stagnant over the past two years. Some areas saw a drop in property prices.

Remember that while a house in a remote area might be cheaper, it will also come with additional costs such as long commutes to work, children’s schools, weekend shopping, social visits, and other expenses. You should choose a location that is easily accessible to your office and other locations.