Factors to Consider By Investing in Real Estate
Real estate has always been seen as a favourable investment proposition that has minimal risk factors involved. There are various types of investors and the question ‘should i invest in real estate’ has different answers for these different types of investors. Like any other investment proposition, real estate requires huge investments that could mean blocking your funds that immediately impacts your liquidity standing. However, the positive factor that excites people is that with real estate investment, there is an ease of entry and exit which immediately minimises the risks. Having said that, there are certain key factors that come in play when investing in real estate. Here are some crucial points for you to consider before you make your investment decision:
Where to invest?
Location is one of the most crucial factors when it comes to investing in real estate. Whether you want to invest in housing properties or commercial spaces, the thumb rule of choosing the right locations stands. There are various factors that make a location a favourable investment proposition such as: its closeness to other key points in and around, the amenities offered, the peacefulness of the area factor, the neighbourhood, views offered and so on. While these are very important for choosing a property for home, there are other demands for a commercial space. These include its accessibility to markets, transport service, tax exemptions, warehouses and so on.
When choosing a investment property, you need to have a mid term to long term perspective, on the opportunities of development that the location has to offer. What seems perfect today, may change drastically within a short span of time and hence a careful consideration of the location is crucial.
Is the Valuation of the Property Justified?
The best way to justify your investment in real estate, is to get the best buy price for the property you intend to invest in. Real estate valuation, should seem right considering various factors like investment analysis, taxation, insurance, listing price and so on. It is important for you to do the maths yourself rather than just relying on what the buyer or the broker has quoted. The cost you are incurring should seem feasible against the expected returns for the investment decision to make sound sense.
Why should you Invest in Real Estate?
One of the key questions that needs an answer from the investor himself. With an investment in real estate, the investor often runs the risk of low liquidity and blocking in higher investment value. Hence, lack of a clear objective or purpose pertaining to the investment can often result in unfavourable results which could also mean financial distress. There are also other factors that influence the buying decision such as :
Should you Invest in a new construction or an established one?
Again it largely depends on the purpose of the investment. A newly constructed property is will certainly come with better facilities and more scope for future appreciation. The number of people to deal with also reduces as the investor only deals with the construction company. There are risks like sudden rise in costs, delay in completion, legal hassles and so on which factor in case of new constructions. Sometimes established properties could also seem like a promising investment opportunity considering its location, neighbourhood and other facilities. In this case its important to look at the ownership documents and other legal conditions.
Learn the Risks
Like any other investment proposition, real estate investment also comes with its share of risks. There are added costs particularly when you opt for loans, which are easy to acquire but could come with a much bigger cost than what you expected.
Indirect investment options in Real Estate
Real estate investments also come with various options, particularly for those who do not want to manage long term property assets. There are various ways though which one can invest into the stocks of the real estate companies directly or through mutual funds. However, these also have associated risks like any other trading stock, that needs to be considerably looked into.
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Blog Archive2015-04-07 12:23:19
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