Do’s and Don’ts of Investing in Property for Great Returns
What are the main things to keep in mind when looking to invest in property? Whether its taxes, value or using your customised checklist for selection and finances, here’s everything you need to know.
Investing in property has and will continue to a popular practice in India—with most of us nurturing the dream of being homeowners since childhood. But buying a house can be daunting to those new to the landscape of real estate. Aside from the basics such as deciding your budget, there are a number of areas potential investors often overlook when examining options for property investment. Here are two major areas that need your attention as well as the details that deserve care.
Find the Right Property
Undoubtedly, the most important aspect of investment is finding the right property. This is in itself is a relatively ambiguous goal as the ‘right property’ entirely depends on what you looking for in terms of budget, financing and purpose. Are you looking for a home for yourself and your family or a property to let out and earn rental income or perhaps one for capital appreciation that you can eventually resell?
Depending on your ultimate aim, here are some key factors to consider when deciding which property to go for:
- Potential Returns: Looking at the resale value or rental value of the houses in the specific area or locality that you are choosing your own home will help you assess the returns you stand to make from your purchase. Additionally, you could find out how much other properties in the areas have appreciated to understand the future rise in value.
- Do your ‘Homework’: Look at softer aspects such as the neighbourhood, crime, school and areas for recreations, green areas or parks, footpaths, distance from the nearest medical help, etc. when you consider a property. This will impact not only your comfort and peace of mind, but also impact the value of your property.
- Upcoming Changes to the Area: Factors such as train or metro stations due to be constructed in the local area or even a highway under construction, could all suggest potential increases in value of the area in the future. So make sure you study projected infrastructural development in the area of your potential new home.
- Property Taxes: The rate of capital gains will have a bearing on when would be a better time to invest in property and sell one, so make sure you keep this in mind too.
- Managing the Property: Most established builders offer services to manage the property on your behalf after purchase whereas other independent sellers (which are often cheaper) offer no such services meaning you have to dedicated resources to overseeing and managing the property. This should be also one of the things you consider.
Furthermore, one of the biggest and most common regret of property investors is wishing they got into business with the right kind of people. The number of property owners who forge relationships with tenants or sellers who they later find out to be troublesome in one way or another are many, and this is an essential consideration in any property deal.
Find the Right Financing
There are various housing finance and borrowing options for those looking to invest in property, depending on different needs and requirements. So choose a flexible option depending what is most suitable to your personal circumstances. The most common loan types are:
- Home Loan: A standardised Home Loan which offers plenty of tax benefits and exemptions
- Offset Loan: Ideal for those looking to save money on their interest payments, this loan type requires the borrower to open a savings account with the lender. By doing this, the borrower doesn’t pay interest on the entire principal but rather on the principal minus any deposits made into the savings account
- Land Purchase Loan: Aimed specifically for a borrower looking to purchase of a plot of land, these loans tend to require a higher deposit and higher EMIs, but may be customised to suit the borrower
The key consideration when looking to invest in property depend on what the purpose of the investment is and what you’re looking to gain from it. Aside from this what is universally advisable is to opt for a financing option, which offers you the most competitive Home Loan interest rate as well as no hidden costs such as those offered by Bajaj Finserv.