In the comparison of different types of investment, real estate involves a comparatively positive risk/reward result, but with moderately little liquidity (ease of entry and exit). Let’s discuss the important point for investigation in real estate.
1. Property Location:-
Why is it important? The longstanding punch line "Location, Location, Location" still regulates the buying decision and remains the leading factor for success in real estate investment. Proximity to day to day services, crime free area, posh neighborhood and eye catching view of the surrounding etc. are the important points for the appraisals of residential property; even as proximity to main markets, warehouses, transport hubs, freeways, freight corridor, etc. play an important role for the appraisals of commercial property.
What try to find? A short-to-long term view, about how the neighborhood is expected to develop during the period of investment. A green open land nearby any residential property of this time may be altered into crowded commercial & residential developments in the near future can decrease the level of appraisal of your property. It is recommendable to do a careful investigation about the property, sort and future prospects of locality, establishments and free land in the area.
2. Valuation of the Property
Why is it important? Transaction in real estate regularly need valuation because it happens rarely and each property is exclusive (especially their locality), not like company stocks, which are operated every day and are the same. Valuation of the property forms the basis for a loan against property, property division and divorces, taxes, and many others. Occasionally a valuation is used to estimate the selling price of the property.
What try to find? Generally used Valuation Methodologies comprise:
• Sales evaluation approach: Current comparable sales of properties with like features –most common and appropriate for both new & old buildings.
• Cost Approach: All expenditure summation minus depreciation – best for the new construction.
• Returns approach: anchored in expected cash inflows - appropriate for rentals.
3. Purpose & Horizon of the Investment:
Why is it important? As we know that investment in real estate demands big investment and give low liquidity, without clarity on purpose may cause surprising results like financial suffering, particularly if the investment is mortgaged.
What try to find? Clarify which one of the following types suits your need and prepare yourself consequently:
• Buy for self-use: Savings on rentals, utilize according to your needs and appreciation in value.
• Buy for Lease: A regular source of monthly income & excellent long term appreciation in value. It requires a nature of landlord who can handle disputes & legal issues, managing occupants, maintenance work, etc.
• Buy for sell in the short term: Immediate, small to average profit - usually buying under construction properties and selling a little high once ready for possession.
• Buy for sell in the long term: excellent appreciation with long time span; best for big aims like retirement planning, child’s education & marriage etc.
4. New development vs Available for Resale:
Why is it important? New developments usually offer attractive pricing, the option of customization, clear paper work, modern amenities etc. The buyer has to deal with only the builder as a counterpart. But risks include like delay in possession, the increase in costs, lack of knowledge about locality, etc.
For the buyers of a resale property has different aspects and may require a more careful investigation of ownership, property related documents and other legal matters.
What try to find?
• Verify previous developments and the status of the real estate developer for the investment in Residential Projects Gurgaon.
• Review property deeds, latest survey and appraisal details for resale properties.
• Clarify fixed monthly maintenance cost, pending dues & taxes from previous landlords. These expenditures can brutally impact your expected cash flows.
• Quality check items (fitting & fixtures and equipment), if available with possession.
Summary
Investment in Real Estate offers an excellent return in short term & long term basis with some risk, but thoughtful consideration of the above mentioned aspects in mind will make possible for investors to get high benefits without any risk.
