Putting money in real estate is one of the safest and most profitable investment avenues. You can earn regular income by letting out your property on rent and its value will also continue to appreciate. However, these benefits will be available only when you choose the right property. There are several other things that you need to consider when investing in real estate. If you want to secure maximum returns on your investment, here’s some of the common real estate investing mistakes to be avoided.
#1. Herd mentality:
Just because a friend or colleague has recommended you a specific property, you should not be prompt to rush and sign the deal. What if they are wrong in their assessment of the property’s earning potential? You need to research on your own and finalize your decision only when you are sure about the property’s short-term and long-term potential.
#2. Not assessing market dynamics:
The real estate market is prone to price fluctuations. This is applicable to cities and their various real estate micro markets. For example, if you consider a specific locality in a city, it is possible that some realty projects will be doing better than others. Before you buy a property, you need to assess market dynamics of that location and try to evaluate how it will impact your investment.
#3. Too lazy to bargain:
Properties don’t come with an MRP and its price is always open for bargaining. Even when the salesperson may be unwilling to budge from the quoted price, you need to persuade them gently to give you some discounts. If you are weak in the art of bargaining, you can take someone along, who can help you with it. Wherever possible, a good bargain can easily reduce your overall investment load by up to 10 percent.
#4. Being awed by the sample flat:
A sample flat can give you a fair idea about the real thing, but avoid making a decision based solely on the sample flat. In most cases, the builder would have hired a professional interior designer to spruce up the sample flat and to make it look highly attractive and spacious. Instead of being awed by the sample flat, you need to focus more on the blueprint, usability, and exact measurements of the flat.
#5. Being tempted by freebies and offers:
It is important that you avoid being attracted by freebies and offers, even though these have become a mainstay in the real estate sector. In most cases, the cost of these freebies and offers would have been included in the price of the property. You should make your decisions based on logic and after checking all the facts.
#6. Blind faith in the builder:
The builder may have a good reputation in the market, but even then you should not trust them blindly. You need to evaluate the specific project on its own merit and not what the builder may have achieved in the past. You may not be fully aware of the company’s management changes, its partners, and financial situation. It is possible that what was once good, may have deteriorated.
#7. Not reading the fine print:
There can be several things in the agreement that can turn the tide against you. What if there’s a clause that absolves the builder from taking responsibility for project delays? Your investment could be stuck for years. And what if there are hidden costs that were not communicated to you earlier? It would increase your overall investment burden. There are several other things that can go wrong if you don’t read the fine print.
#8. Not verifying permissions and approvals:
A real estate project has to get a number of permissions and approvals such as non-agricultural (NA) permission, approval from tree authority, environmental clearance, structural plan approval, a certificate from the fire department, etc. If the builder does not have the necessary permissions, the future of the project and your investment would be at risk. You should invest only after you have personally verified that the project has all the required permissions and approvals.
#9. Not checking your finances:
People often rush to buy a property and fail to evaluate their own financial position. For example, very few people actually check their credit score before applying for a home loan. Most people just assume that they would be getting the amount of home loan they need. However, this may not be true. Before making the down-payment, you need to check with your bank to know your exact home loan eligibility.
Real estate investments are the most profitable in the long-term, so you should have the adequate financial backing to support your investment. You also need to be patient because the realty market is prone to price fluctuations. Rushing to sell your property, just because there’s been a temporary stagnation in property prices, is not a wise move. In most cases, property prices will bounce back in the long run. So, keep the invested and wait for the right time to sell your property. This way, you will be able to realize the best returns on your real estate investment.