How to make a wise property investment
Successful investors safeguard their investments by floating a nominal limited liability company for their activities WHAT’S IN IT FOR... INVESTORS END-USERS
Getting into real estate investment without a proper understanding of what you aim to achieve, is not a good idea. There are many risks involved but with the right data and advice, you can make a good property investment. Here is a general blueprint.
To begin with, you should know what the odds are. The chances for inexperienced property investors to either succeed or lose a lot of money are more or less evenly balanced. The likelihood of suffering a loss is greater if the investor does not have a good idea of the state of the local property market. It may seem like a gamble but you need to be well-informed.
Before investing in property, make sure that you have enough insurance. Successful investors safeguard their investments by floating a nominal limited liability company for their activities. This is certainly an option, but not really a necessity unless you are playing for very high stakes and investing in multiple properties.
Advice to end-users
Property investors actually fall under two broad categories — end-users and pure investors. End-users can technically be described as investors in some cases. These individuals seek to make a percentage of profit on properties that they are themselves occupying. This may involve partial rental or sale of a home or office, retail or factory space. This is not a very common practice, and happens in cases where the property is much bigger, and the part being rented out or sold would otherwise remain idle and non-productive, says Kishor Pate, CMD, Amit Enterprises Housing Ltd.
More commonly, an end-user seeks to sell the entire property. This is usually done for reasons other than returns on investment like the seller may be seeking larger or more luxurious premises, or the seller may be in the process of relocation, or he/she may not be satisfied with the property for other reasons. There may also be a need to downgrade on certain expenses such as maintenance costs. If the sale of such a property is need- based, the profitability usually reduces, since the seller needs to cash in within a limited period, he says.
The kind of profit an end-user can make on the sale of a property depends on the age and state of the property, its location and its market value. A residence purchased five or ten years ago would have appreciated in value for the simple reason that property rates are constantly increasing. The value of the property will be even higher if the location is in high demand. However, the price that a property (which was in use until the time it is put on the market) will fetch also depends on whether or not it is well-maintained, if the owner has upgraded certain features to make it more attractive to buyers, etc.
Advice to pure investors
Exclusive or pure investors buy property for the exclusive purpose of earning a profit on them; they do not utilise t he estate personally. The properties in question can be residential (flats, bungalows, row houses, duplexes, etc), commercial ( offices, factory sheds, etc), retail (mall space) and non-developed or partially developed land.
Pure investors have a better chance of making a profit in their dealings simply because their It is always more profitable to invest in under-construction properties or those still in the planning stage. By the date of actual completion, rates tend to be higher
options are wider. There is also no urgency involved as the basic objective is profit. Since they do not intend to occupy the premises themselves, they can rent out the property until the time they sell it at appreciated rates.
Investors of this kind should keep certain guidelines in mind: Location is everything. Even if rates are steeper in a preferred area, go for it. It will pay rich dividends in the final analysis.
It is always more profitable to invest in under-construction properties or those still in the planning stage. By the date of actual completion, rates will tend to be higher.
If one chooses to invest in residential real estate, the first preference should be for flats that are located on the first floor. They should offer a good view and ventilation and amenities such as swimming pool, clubhouse and so on. They should also be backed by adequate parking facilities. Most buyers do The kind of profit an end-user can make on the sale of a property depends on factors such as the age and state of the property, the area where it is located and its market value
not make compromises on this last factor, even if they give consideration to the others. Choose to invest in properties by reputable developers. This can make a big difference in the long run.
As far as ready-for-possession properties are concerned, certain dynamics of the property market remain constant, so a profit is still possible. However, a readyto-move-in property bought for the purpose of investment will have to be given sufficient time to appreciate in value. Also, certain modifications specific to a potential customer’s needs may have to be made. The cost that this involves would have to be adjusted in the final amount.
Finally, if you are new to property investment and are utilising a housing/ investment loan in order to invest in property, ensure that the ratio of self-finance-to-loan amount is conducive to a future profit. Also, double-check all legal documents. Property investment is not a game of blind man’s bluff.