Common Risks Involved in Real Estate Investment
In India, for a long time, realty is considered as one of the most prosperous investment markets. This is because it ensures profitable returns and the chances of risks are low when it is carefully done. While a properly evaluated real investment does a lot of good, a badly timed investment can easily bring you down emotionally and financially. Now, here in this article, let us see the common mistakes that inexperienced investors make and look to avoid them in many cases for better returns.
1. Not timing the process:
In case of property and real estate, there is no right time for investment. As it is a requirement based product, sometimes the demand would be high and sometimes the demand would be low. When there are many investors coming in to pump their capital in one place, it is not advisable to invest in a property in the same location. This is because as a buyer, it will be hard to bargain for units at these places. Buying a property without proper research is a risky affair, to say the least.
2. Not researching enough before Real Estate Investment:
Proper research is vital before investing in a property. Not doing that might show repercussions later in the future. Some investors only look at the possibility of capital appreciation and rental returns. But it is vital to go beyond that and research about employment opportunities in the area, dynamics of the demand-supply ratio, future socio-infrastructural plans, and so on. The type of property should also be put into consideration, whether it should be one of the apartments in Pallavaram, commercial building floor in Anna Salai, plots, individual house, luxury villas in Chennai, etc.
3. Falling for cheap properties:
Unbelievably cheap property rates are a clear red flag. These properties might have their own faults like a need for high maintenance, constant repairing needs, bad underground water levels, bad history in the property, etc. So, it is vital to keep the emotional aspects aside and consider it as an investment asset.
4. Selling the property too fast:
Real estate investment require a lot of patience and it takes a lot of time for the property to grow in value according to the development of the location. Experts say that the ideal time to liquidate property is relative to the exit period. It should be considered as a long-term investment and it is best to wait for at least 7 years to a decade for better appreciation in value.
5. Taking advice from amateurs:
Professional real estate investment experts tend to charge a lot for good advice. And so, new investors tend to seek advice from amateurs in the field who have no expertise. But they might have the knowledge of verifying documents, and other legal processes involved. However, they do not know the market which comes from direct expertise for at least a few years.
6. Not following a strategy:
Going into realty investment without a goal and a knack to evaluate cash flow projections is wrong. Not following a well-articulated strategy might lead to financial loss and stress due to the same. These things differ with age, capital in hand, experience and risk profile. An individual’s strategy is not necessarily effective to someone else’s successful strategy.
For further read: How is EMI for Housing Loans Calculated?
7. Not updating the portfolio:
Investors should consider the process as a business and update the plan as situations keep changing. Performance of the property should be noted on a timely basis to predict and be ready for an exit strategy. The market dynamics depend on several other factors like infrastructural changes, dip, and rise in employment prospects, etc.