Recently the home loan rates are dropped drastically (all-time low in last probably 10 years) and the confusion over GST finally clearing up, investment in real estate is on the rise again. And just like any other investment, there is a right and wrong way when going to invest in real estate. One can be more cautious while investing since fraudulent home builders are also out there.
Investing in real estate can be a profitable and worthwhile to build your cash-flow, incur returns on investment, aside from building a legacy for your kids to carry on. However, you do need to act smart and avoid common investment pitfalls to achieve significant success in real estate investment.
Here are a few lethal mistakes to avoid:
Location of the property – Just because you love the look of the property doesn’t mean you have to buy it. Make sure that it’s in an area where it is easy to get renters. The location shouldn’t be in a traffic-dense area or close to industries that are polluting the environment, making it unattractive.
Neighborhood – Everyone wants to live in a safe neighbourhood, where kids feel safe to walk back home after dusk. You also don’t want a neighbourhood where there is a noisy bar or nightclub nearby. You wouldn’t want to live there and neither would a renter.
Bank loans – Don’t finalize on a property before finding out how many loans you are worth first; you need to have a plan before going property-hunting – know how much you can invest, otherwise, you are just going about it backwards. You can check with the builders about the pre-approvals from the banks with respect to housing loans you can avail. Compare the interest charges banks charge and all the respective fees also.
Skipping homework – A surgeon can’t perform a surgery without having studied about it first. Similarly, you can’t jump into real estate investment without doing some homework first. Study the market rates, the value of properties in different areas, the maintenance costs expected, the EMIs to be paid and how you will source the funds.
Getting-rich-quick – Many investors jump into the real estate market expecting to hit gold within a short period. Do understand that your money will be tied up for the long-haul before it can give you the kind of dividends you have been dreaming about. You need to get smart and understand your risk-investment before jumping in with both feet. Consult a chartered accountant and understand about the capital gain taxes and any tax soaps you get.
Playground of the rich – Many people feel that only the wealthy can afford to enter into real estate investments; but you can too, provided you get your financial break-ups right. Analyze your gross income, operating income, EMI payments, cash flows and total returns. You will be safe.