Buying Investment Property- Rules to Follow

Category: Real Estate

Real Estate has evolved much from just finding a home for yourself. Over the last century, it has become a lucrative investment options with returns surpassing all other modes of investments. However, buying a real estate property for investment purpose is not everyone’s cup of tea, especially if you are investing in properties in India, where the market is characterized with high volatility. It takes lot of knowledge and experience before you become a seasoned player in the industry and your investments skyrocket. Following are some key points which should be kept in mind when buying investment property: 1. Real estate investment means long term investment Surely, you can jump on a bandwagon making quick gains, but real estate has traditionally been associated with long term investment. So before you invest, keep in mind the time horizon during which your money shall be locked. Focus on long term goals for which you want to invest. 2. Prefer investment in properties that can be rented out Investment in properties which could be rented out ensures that you have a steady cash inflow while your property appreciates in value. This would especially be important in cases where you use borrowed fund to make investment. By renting the property, it can be ensured that you have sufficient cash flow to meet the instalment amount. 3. Hunt for properties in developing areas Buying properties in developing areas is characterized by exponential growth in the value of investments. However, there is also high risk component involved in such investments. Therefore, a proper analysis of various factors should be made before any such investment is made. 4. Get acquainted with the business Reading about real estate will definitely help you a lot in understanding the current market and economic scenario. Use the freely available information on internet to your advantage and make informed decisions. 5. Know your time commitments well in advance Real estate market is time consuming due to its very nature. It takes time to look for valuable property, arrange finance and lock the deal. Much time is also invested in learning about the market and economy. Therefore, be aware of your time commitments before you dive in full time. 6. Keep in mind the ‘1%’ rule The rule is very simple. Invest in properties which gives you at least 1 percent return per month on the amount invested, be it in the form of rent or capital appreciation. This way you can make sure that your investments are not devaluing due to inflation effect. Real estate market is famous for fabulous returns it gives to the investor. However, there are also sample examples where the investors bankrupted themselves due to wrong decisions. Therefore, you must be sure about what you are doing before you start investing in real estate business.