Considering Real Estate Investments? - Be an Ant or a Grasshopper, You Decide!

An investment as we all know, could be a risky affair, be it stocks & bonds or be it property. In this risk-taking, yet high-yielding scenario, you can either be the ant, consistent and methodological or you could be a grasshopper, making the most of what is available and not evaluating, what could be available.Upon asking “What makes you okay a property?”One of the realtors, to my surprise said, “Instinct! ”.Well, may be logic plus instinct could have been a better answer, but we believe that investments should be a rational process and the success outcomes can be derived at the time of investment itself. All you need to do is, ponder over these three aspects:

3 Steps to kick start your 1st Real Estate Investment

1) Do you have an investment strategy?2) The key criteria3) Are you ready?

1. Formulating the right strategy:

Scan the local real estate marketsSpend considerable amount of time educating yourself about the local market. Take the effort to list down existing and new projects, vacancy, rental activity and the absorption trend, these will give you gather valuable market insights.Burn plenty of shoe leather…Property is a physical product and sellers have a vested interest in showing it up in best light.  Don’t just blindly believe what you see on your laptop screen. Get off the couch and visit, visit and visit till a get a feel of the product-market.Start small, like the antsBegin by buying small properties, even if it is in the outskirts. The risk is low and the chances are high that for it to be sold easily, at a decent profit, as, it’s always the lower priced properties that are the fastest moving.Store what you can saveJust like the ant stores only food that can be preserved and not food that can get rotten, most people buy a property without the slightest clue about the actual profit they are likely to make. Since you have decided to reap the long term benefits and not just for buying a property and staying in it you need to know the complete details and workings of your investment. This knowledge will help you understand what kind of property yields what kind of returns. A few concepts that you should seek more clarity in are Net operating income, Cash flow, Return on Investment etc.Understanding property valuesWe all know that property price is different from the market value. The latter is the actual amount the property is worth. This is influenced by many factors like type, make, location etc., but you as a buyer should know the actual property value so that you don’t end up paying more than its worth. Some of the key factors that you should analyse here are the area, proximity to school, market, mall, airport and business center, how old/new is the property and the facilities available there.

2. Have your plan in place...

You might be thrilled with multi projects at the same time. Do not haste into the decision-making process. Do the math and see which option yields maximum returns. You can keep the big budget ones, for later.Some questions you have to ask yourself?

• What is your own margin/ how much you can borrow safely?
• How much EMI you can continue to pay if you are in between jobs for upto 6 months?
• What is the exit plan?  When and at what price you will sell it?
• What happens if the market tanks and you are unable to get the price you expected? Will you sell at a lower price or keep the investment?
• In such a scenario, what will be your investment plan?

3. Readiness?

Controlling your debtBe very conservative with your borrowings.  Calculate the worth of your disposable income and limit your borrowings accordingly. Do not start off investing by paying through your nose. Borrow only how much you think you can pay back comfortably. After all, interest amounts cannot be ignored.To summarise, by calculating the returns on your disposable income and keeping in mind the risk factors involved, you can make any investment a great deal. Going back to the ant and grasshopper anecdote, you have wisely saved up for the unfavourable times, and the grasshopper is dying of hunger. Well, doesn’t this point out towards the next potential investor, who would shell anything to buy from you? Any smart ant would have a barter going on there, wouldn’t it?