Seven Tips for investing in Real Estate

While there are numerous tips, seasoned brokers will have for you, I have found these seven to be extremely useful in evaluating properties to be bought.

1. Invest in affordable housing 

• No matter what your budget, you will find that smaller budget properties generally appreciate better than high value trophy houses. Look out for rentable property which will give you a fair return and is resalable. Beware of properties located in far off suburbs with low connectivity that limit the rental value, as well as, resale value.

2. Diversify your pool 

• Do not invest your entire surplus in that one “golden” opportunity. Instead start a small chain of investments, gradually, into a small number of properties as well as property types. This will also allow you to divest as you require rather than getting stuck with a high value property (relatively speaking). Differential appreciation of the properties will make it a lesser risky portfolio to manage.

3. Invest in commercial space 

• Most of us naturally go in for residential properties rather than commercial properties. Apple for apple commercial properties will give you a higher return. Returns on residential properties range from 2.5% to 4% as compared to commercial which ranges from 7% to 9.5%. However, do your home-work well on total costs of ownership and check for ownership details.

4. Invest in parking lots. 

• The mayhem created by vehicles of the owners and their visitors has created a unique opportunity to invest in parking lots. Keep aside a good budget for parking lots. Negotiate hard with the builder or seller for buying extra lots. You can then rent these out for generating a good rate of return (8-10%), besides being highly saleable with good appreciation.Compare that with the rate of returns mentioned above.

5. Location is the most important criterion for selecting a property for investment. 

Invest in properties which are well-located.

• Evaluate Infrastructure surrounding the project –Roads , bottle-necks, one-way access, shopping centers, hospitals, parks, connectivity, Distance from commercial centers and your work.

• If you are an investor, stay away from properties in “future growth areas” read that as "Located in remote areas". Most projects suffer from delays in approval, delays in implementation and cost over-runs which may delay them as much as by 2-4 years. 
• You will need to hard-sell such a property to dispose it and appreciation will be minimal. If at all, you are attracted to these properties, look out for existing socio-economic benefits. A 5-10 year growth story will benefit only someone, coming years later, or, someone who does not need to count his returns till the next few years. My view is that all projections for future economic growth in a location need to be accepted with a large pinch of salt.

6. Invest in old but well-maintained properties.

• Try and buy an old property which is well-maintained located in a good and efficient society. Do it up and sell or lease. Your initial outlay for acquisition could well me much lower, and therefore, returns effectively higher.

7. Invest in properties with amenities 

• Times have changed. Everyone I know and their families like to have a gym , swimming pool and a walking track in the complex they buy. Similarly, in a commercial complex, people look for parking, lobby, centralized air-conditioning, Building Management Systems (BMS), security and back-up generators. Your property value will grow in these properties. So use this yard-stick for comparing the properties.