The following is by staff writer, Peter.
Buying a new house can be an exciting and a stressful time for anyone. There are a number of different factors and circumstances that must be accounted for and considered. Whether you’re looking to buy a new home for you and your family, or looking to invest in residential property for financial gain, you need to do some research and be smart about your decisions. Buying for your family and investing for purely financial gain are two wildly different circumstances. While purchasing a house to live in is still an investment, there are additional points that need consideration in regards to your family and their needs. This article will focus solely on investment in residential property for financial gain. So if you need advice on house hunting for living quarters, you should go elsewhere. The following tips are not meant to be a foolproof guide to buying property, but if you keep them in mind and go about things intelligently, you’ll come out on top financially.
Type of Property, Location, and the Market
The first thing you need to reach a decision on is the type of property you wish to buy. Condos, apartments, and houses all have their own unique advantages and disadvantages when you invest in them. All three can provide you with significant capital appreciation and rental profits, but other factors, like maintenance and documentation can differ.
Once you’ve decided on what type of property you’d like to invest in, you need to find a good location. According to NDTV, there are six cities that are leading the way in residential market recovery and appreciation; Mumbai, Bangalore, Pune, Hyderabad,Chennai, and NCR have all shown growth over 2014 and are likely to continue growing. However, before you jump into buying property in one of those locations, it is still highly recommended that you do some research into the local residential property market. According to Money Crashers, researching local housing markets can help you discover whether the area you want to buy into is likely to continuing growing, or if a housing bubble is going to pop and drop prices and growth drastically.
Monitoring the market on a regular basis is a necessity if you intend to keep your investment for a prolonged period of time. Business Today states that keeping an eye on the fluctuations of the market can give you the necessary information, such as if the market has matured and limited growth is occurring, to decide whether to sell and exit that particular market before prices drop.
A good route to take when looking for a property is to look for residential projects by Unitech Group or other real estate agencies that will have a lot of the necessary information you’re looking for.
Investment Length and ROI
ROI, or Return on Investment, is the ratio of profit earned versus original investment cost. Investopedia describes ROI as a way to measure the efficiency of your investments through comparison and calculation. The usual formula for calculating the ROI on your investments is to take the gain you’ve earned and subtract the cost. The result of that is then divided by the cost, giving you a result that can be changed to a percentage displaying your ROI.
One of the major factors defining whether you get a good ROI is how long you hold on to the property. Business Today suggests holding a property for a minimum of three years (three years is also the period of time differentiating between a short-term and long-term investment for tax reasons). However, they state that the best returns are usually generated somewhere between five and seven years.
Buying a property in the hopes of selling it soon for short-term financial gain is a possibility, but not recommended. Not only are those profits taxed at a higher rate, but you will also miss out on the potential for the serious capital appreciation you can expect to see over a long-term investment.
Finances and Income Stability
Investing in residential property is not cheap. One route you can take to help keep your costs relatively low is to buy into under-construction projects, preferably just as they launch. Doing this is a good way to find investments for long-term capital gains. Regardless of where and when you buy a property, chances are you will need to talk to a bank to get a loan. Dealing with a bank can be stressful, but as long as you’ve done your research and have made sure all necessary documentation and clearances are present, you shouldn’t have any issues.
A reliable, stable source of income is a necessity before deciding to invest. If you don’t have a reliable source of income, getting a loan and investing in a pricey piece of property is liable to land you in some serious financial problems. While a property investment can provide you with a good deal of financial gain, it’s not going to pay off for a number of years, especially if you want to maximize your ROI. Regardless, Jago Investor states property investment is an excellent way to diversify your financial portfolio.