DELHI: Getting into real estate investment without a proper understanding of what you aim to achieve is not advisable. There are many risks involved in real estate investment. However, with the right data and advice, you can definitely succeed in property investment. Here is a general blueprint.
To begin with, you should know what the odds are. The fact is that the chances for inexperienced property investors to either succeed or lose out a lot of money are more or less evenly balanced. The likelihood of suffering a loss is greater if the investor does not have a good idea of the state of the local property market.
Before investing in property, make sure that you have enough insurance. Many investors who have succeeded in the property arena safeguard their investments by floating a nominal limited liability company for their activities. This is certainly an option, but not really a necessity unless you are playing for very high stakes and investing in multiple properties.
Advice for end-users
Property investors actually fall into two broad categories: end users and pure investors. Even end users can technically be described as investors in some cases. These individuals seek to make a percentage of profit on properties that they are themselves occupying. This may involve partial rental or sale of a home or office, retail or factory space. This is not a very common practice, and is usually seen only in cases where the the property is of larger proportions and the part being rented out or sold would otherwise remain idle and non-productive.
More commonly, an end user seeks to sell the entire property. This is usually done for reasons other than returns on investment – the seller may be seeking larger or more luxurious premises, may be in the process of relocation, or may not be satisfied with the property for other reasons. There may also be a need to downgrade on certain expenses such as maintenance costs. If the sale of such a property is need-based, the profitability usually reduces since the seller needs to cash it within a limited period.
The kind of profit an end user can make on the sale of a property depends on the age and state of the property, its location and its inherent value on the market. A residence purchased five or ten years ago will see appreciation in value for the simple reason that property rates are constantly increasing.
The value of the property will be even higher if the location is the one that is high in demand. However, the price that a property which was in use until the time it is put on the market will fetch also depends on whether or not it is well maintained, whether or not the owner upgraded certain features to make it more attractive to buyers, etc.