Be it buying a house/apartment or investing in a commercial space, real estate is something in which we put our hard-earned money that we gather over a long period. And when we are putting our life’s savings into something, we must make sure that it is going to the right place.
With prospects of great returns, investing in property is a great way to create wealth. A single intelligent investment in a real estate project can generate a lot of money, either by professional use, rental income or by sale of property.
More often than not, property investments come across as a safe & easy investment option. But like any other investment, it has its share of risks. Living in India we are all too aware of disputes between home-buyers and developers, and what we see in the news is a great example of the risks in the real estate sector.
Before you decide to put your money in a real estate project, you must understand all the risks attached to the property. But there’s a catch! The risks in property investment are not always apparent and may be hard to identify.
The reason behind writing this blog is to inform property buyers about the risks and help them identify a bad investment, so here it goes:
The first and probably the most important thing that you need to check before you invest in a property is its “location”. A property may be otherwise perfect in all aspects, but a bad locality can still be a cause of serious problems.
Unruly neighbourhoods face many issues like burglary, theft and other serious security issues; needless to say the properties either residential or commercial in these areas are vulnerable to such problems. A great way to find more about a location is to roam around the neighbourhood and check the condition of the building there, you can also talk to a few people who have been living there and ask them about the common problems in the neighbourhood.
Apart from the overall civility and security of the neighbourhood, another aspect that is just as important is access to civic amenities. Proper roads, public transport, good schools, hospital, markets, parks & recreational areas etc are the things that make neighbourhoods a cohesive and complete ecosystem in which both commercial and family life can be sustained. For properties that are being developed in new & upcoming areas, you can check out the action plan of that location and invest accordingly.
- Reputation Of The Developer
In India, property frauds & disputes between home-buyers and developers are unfortunately a regular phenomenon. And, one way to protect you from such situations is to invest in a property which is being developed by a trusted real estate company. A simple online research can give you some reviews about the developer, and you can also examine some of their earlier projects to get to know them better.
While negotiating with the developers, check if they are being transparent or not. If they are subversive or if they are evading important questions, there could be a catch. A good real estate company which has a robust reputation in the market will never hide any vital information from its buyers.
Many dealers and developers use pressure tactics to push a customer into a deal, such people should not be trusted. If you are being pushed around to complete the paperwork quickly or if you witness that you are being hounded to make an early payment, it is best to walk away from such a deal. It is better to lose a deal than ending up investing in a bad property.
- Price Of The Property
While you observe the price of a property you have to trust your gut. A property, in which the price is too good to be true, should raise your suspicions. It could very well be a seller who is trying to get rid of a property that has many hidden issues. It is best to avoid such property deals, but just in case you find something promising, you must investigate thoroughly about the property.
When it comes to property investment, it is always better to plan for a longer-term. If in a property, there is a prospect for good returns over the long run, there is no harm in paying a slightly higher price. This is especially true when it comes to investing for rental income or buying commercial spaces. One thing you, however, need to be careful about is not to invest beyond your financial means.
Related: Is real estate better than the stock market?, Factors affecting Land Value
- Quality Of The Building
Visiting the property will give you a great idea of the quality of construction. If you are allowed access to the property it is important that you don’t get enamoured by the aesthetics of the building, and if you see any problems or compromises you must communicate that to the developer.
Being denied access to inspect the building is something that should raise an alarm; it may be a sign that there are some compromises in the quality of construction. It is best to walk away from a deal in which, even after repeated requests, you are not allowed access to the property.
- Time On The Market
If a property has remained unsold for too long, there must be some pressing reasons behind it. It could be that the price of the property is inflated, or there could be other reasons like poor location or the reputation of the developer.
If you find a promising opportunity in any such property, it is best to research it in detail. A property which has stayed for a long time in the market can wait a little bit more for you too, so don’t rush into investing and take your time to investigate the property.
The landscape of real estate investment can be quite challenging and for the first-timers, it can be especially hard to navigate. The factors mentioned in this blog can help you cross many obstacles, but if you area first time investor, another advice to you will be to research as much as possible, have patience and trust your instincts.