Want to invest in property, but have no idea of how to kick off your search?
Let us understand how to go about. Parallel to cash, stocks and bonds; property is also one amongst the four most common types of investments.
There are some important factors to consider when investing in property. If these factors are considered when investing in property, it will help increase the capital appreciation and rental income from the property. So pay proper attention to these primary factors to consider when investing in property.
1st factor to consider when investing in property : Property Location
This is an integral and an inevitable factor to contemplate upon securing a good property for investment. Location is a primary thing, which if chosen correctly, can largely increase your chances of gaining higher investment returns. And, this will be far greater than that for an unfit or undesirable location. Some very significant factors to consider when investing in property are:
a. Proximity to basic and necessary amenities like schools, offices, workplace, and public facilities such as post office, parks, medical help, etc. Also, when investing in property consider factors like connectivity and transportation facilities in and around the location.
b. Amenities like shops, markets/malls, banks, and recreation and lifestyle activities (like restaurants, food joints, cafés, etc.).
c. Kind of surrounding locations - commercial, industrial or residential.
Closeness to certain amenities is very important in increasing the value and desirability of a location or property.
Location is the first and foremost important factor to consider when investing in property.
2nd factor to consider when investing in property : Property with Potential Demand
Look for a property that is in repeated demand by people who wish to inhabit it on rent as well as purchase the same in future. Do a good research to find out the demographics of the area. Also, discover what is important to this demographic.
If property is under development, then keep a track record of the developer to derive the quality of development and its future prospects. It can also help you with an understanding on whether or not will the development finish in time, as well as their financing ability.
Property with potential demand is the second important factor to consider when investing in property.
3rd factor to consider when investing in property : Returns
Never make the mistake to choose a property, based on emotions rather than your finances and logic. An inappropriate purchase can either result you into a capital growth that is below the market average, or a small rental income that is far less from covering your monthly costs of property maintenance.
Therefore, it is a very important aspect that you do a good research and then define a strategy accordingly for investing in property, than just making a purchase in haste. It will be just like managing your risk. As long as you watch your step on the downside, the upside will watch out for themselves.
Return is an important factor to be considered when investing in property.
4th factor to consider when investing in property : Capital Gains
The key for property price appreciation is sustainability of demand and shortage of supply. Prices are sure to increase if the population growth is faster than the supply of the houses. Another aspect to consider is the location’s price history and ongoing rising trends. Considerable future developments like a new business or a new station or train line, can increase the location value.
Learning about the factors to consider when investing in property or real estate, we can conclude that it involves lesser risks, and at the same time offers good expected returns. Eventually, it is all about how well you manage the risks that is central to selecting the best property for investment. To decide whether real estate investments need to be part of your portfolio or not, you need to have a financial plan mapped with all your financial goals.
The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in
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