Choose the Right Location Real Estate
Pakistan’s real estate is growing rapidly and here are tips to choose the right real-estate for investment. Choosing the right location is important for any investment in real estate. Moreover, location is the only thing that matters before buying any real estate. When you’re looking for a property to purchase, keep in mind that the value you can get from your investment will be based on the potential tenants. In other words, location is the key. In addition, people tend to look for housing that’s situated near work, commercial sector, or bus station which means that properties close to these areas are higher in demand. However, if you’re willing to take more risk, it may also be worth investing in an area that’s likely to see solid growth in the coming months or years, such as near proposed infrastructural changes.
Choose Real Estate growth Areas
Before investing in real estate there are things that need to be done. For example, research and visit are crucial steps for acquiring a state. The time invested in research and visiting will be harvested in no time. Therefore always be on the lookout for areas that are expanding in terms of population, commercial property, and local infrastructure.
Buy or Finance Calculate ROI
In order to choose the right real-estate for the investment it’s better to buy with cash or to finance your investment property? That purely depends on your investing goals. Firstly paying cash can help generate positive monthly cash flow. For instance, take a property that cost 10 million to buy, with a rental income of 11.4%, the cash buyer could earn 1.14 million annually exclusive of income tax.
On the other hand, financing can give you a greater return. For example, an investor who puts down 20% on a house, with 5.75% on the mortgage. After taking out operating expenses and additional interest the cash flow is lower for the investor. But a 28% annual return down payment is much higher than the 11.4% earned by a cash buyer.
Maintain Legal Obligation
Real Estate owners need to be familiar with property laws and agreements in order to maintain legal obligations. For example rights, agreement, and obligations regarding security deposits, lease requirements, eviction rules, fair housing, and more in order to avoid legal hassles.
Choose Low Maintenance Property
Look for a property that is ready to rent out immediately unless you have a plan to add value through renovating. For instance, a house with a pool, a large garden requires a lot of care and time, whereas a similar home on a smaller block with a flat, grassed backyard is far easier to maintain.
Choose a property that is close to plenty of amenities
The last thing you want is to be stuck with a property in an area that is declining rather than stable or picking up steam. A city where the population is growing and a revitalization plan underway represent potential investment opportunities.
Look for a location with low property taxes, a decent school district, and plenty of amenities, such as parks, malls, restaurants, and movie theaters.
Carefully Check Loan Term and Agreements
Once you’ve chosen the right real estate investment property, there are several ways to raise capital. Carefully checking for loan terms and agreements is an important part of acquiring a property. However you may have money that you need to invest, or you may have to shop around for a loan. If you take out a loan, make sure that you pay careful attention to the details. A poorly chosen loan can be the difference between a profitable investment property venture and an expensive one.
One specific option to keep in mind is the interest-only loan. Instead of paying toward the principal of the mortgage. You’ll only make an interest payment every month for a set amount of time, usually around five years. After the time is up, you may be able to refinance the loan, pay off the principal amount in a lump sum, or continue making payments that include the principle. Moreover, these can be a good option if you plan on purchasing several properties, as the repayment levels are lower than on a principal & interest loan thus increasing your ability to service further loans.
Avoid Unplanned Properties
When you have chosen the right real-estate for investment remember unplanned Properties are properties that share the same features with each other. They’re often built at the same time by the same developer and often have very similar, if not identical designs. However they’re so similar, they’re often cheap to build, which means they are often cheap to buy and lastly they lack creativity and innovation. They’re often clustered together and they tend to go to market at a similar time when construction is finished or leases expire. Because of this, it’s difficult to leverage the location and amenities the property offers too much competition among property owners to attract buyers.
Keep Supply & Demand in Mind
One of the major factors in determining the property is its location. The availability of properties in the immediate areas determines the supply and demand of the property and ultimately its value. Consider two dwellings (house) that are a short walk to public transportation and close to exciting shops and restaurants. They’ll have high value and both of them are going to be in demand. On the other hand, unplanned properties will have low demand and high supply so the negotiation will be easy and rates will be low because of the greater supply of houses.
Weight the Risk and Reward
In every financial decision, you must determine if the payoff is worth the potential risks involved. Does invest in this real estate still make sense for you?
- Although rental value is passive, it can be a pain to deal with unless you use a property management company.
- The rental value may not cover your total mortgage payment.
- Unlike FMCG (Fast Moving Consumer Goods), you can’t instantly sell real estate if the market goes sour or you need cash.
- Entry and exit cost can be high
- The income will be passive, no time and energy will be wasted and you will have time to put most of your energy into your regular job.
- If the real estate value increases your investment also will rise in value.
- The interest you pay on an investment property loan is tax-deductible.
- During crises, real estate values are generally more stable than the stock market.
- Unlike investing in intangible products or services, real estate is tangible and has a stable return value.