5 Important Reality Checks you should make before investing in real estate
Apr 23, 2021
Investments made in real estate are considered to be ‘blue chip’ investments. People assume that buying into real estate is like taking a lottery where nothing can wrong. No doubt real estate is one of the safest and most recommended investments options available to the common man. In a populous country like India, land and living space is always scarce and the demand always exceeds the supply. Hence good returns are assured on investments made in real estate. However, like in any investment, sufficient care should be taken to ensure that there are no hidden problems before taking the final decision to make a purchase. Even in the best properties, unforeseen issues can arise which put your money to risk or expose you to great hardship. ‘Reality Check’ is needed before you put your hard earned money in these investments.
Here are the 5 common precautions to take while investing in real estate.
1. Check credibility of the stakeholders
Credibility is the most important aspect to consider in any business transaction. Real estate transactions involve various stakeholders like buyer, seller, broker/agent and property developer. Before getting into the transaction, make your own enquiries to check on the market reputation of the people you are dealing with. Genuine people tend to be transparent and professional. They enjoy good reputation, will be financially sound and have a history of satisfied customers. If you come across any negative reviews, then take a second opinion from related sources. When in doubt don’t invest. Instead seek more information to get clarity.
2. Evaluate your financial capability
Any investment in real estate involves big money. For middle class people having fixed stable income, a big buy can drain all the resources. Hence it is very important to plan the investment properly. A rash investment can put you through tremendous financial stress and cause medium term or long term hardship to you as well as your family. Apart from the major expenses like the cost of the property, taxes and registration fee, there are many other hidden costs involved in property investment. If you are buying a house you have to consider maintenance costs, cost of furnishing and interiors, cost of repairs if any, utility charges, etc. Prepare a detailed document of the expenses and check whether you can afford it. If you are planning to take a home loan, then you must consult with a bank to know your eligibility. Having a good credit score will help you get a loan at lower interest rates and longer repayment tenure. A credit score of 700 or above is considered to be good and increases your credibility to get a loan.
3. Verify the builder’s reputation
Urban property purchases usually happen through a real estate developer. Choosing a reputed and trusted real estate developer ensures the credibility of your investment. A renowned real estate brand will procure all relevant legal permits and documents required for property sale. They also ensure that their projects are approved by RERA to ensure transparency in all transactions. Furthermore, remember to check on the after-sales track record of the developer. Dedicated developers will not compromise on quality as they know that only satisfied customers can guarantee repeat business. Their long standing experience ensures good quality construction and excellent customer service. You can visit the company website, social media pages, project sites or enquire with their existing customers to get a complete picture of the developer.
4. Choose the right type of property
Choosing the right type of property is most important while considering a real estate purchase. You can either buy a residential property or invest in a commercial space. Most of the first-time investors tend to overlook this aspect because they may not have much idea about the real estate market. Choosing the wrong property can put your money at risk and result in dead investments. Consider buying properties in prime locations as they will always have great demand. Also, look for in-house amenities and civic facilities nearby the property. You can get good resale value and returns from such properties. Depending on your budget and purpose, shortlist a few properties and seek help from a trusted property advisor to make the right choice.
5. Seek expert advice
Most first time real estate investors typically suffer from over confidence. They tend to gamble than to invest. While sound investment should be based on facts and not speculation, first time investors will go by intuition, first impression or pre-conceived notions. Hence it is always advisable for amateur investors to seek professional help for real estate investments to insure against their inexperience. Industry experts will be aware of the pitfalls which put the investors into trouble later on. The experts will advice the investors regarding the numerous unknown issues associated with properties. Interacting with a reliable property advisor will not only save you from fraudulent offers but will also ensure that your property is free of legal issues. An experienced real estate agent can find you a good property at a fair price deal. Also, it is always ideal to consult a financial advisor to plan your expenses and prepare yourself for the investment.
The above are only some of the key issues on which you need to be vigilant before investing in properties. We hope you have gained a better perspective on making wise real estate investments in the future. Observing these precautions will certainly work in your favour.
