5 Things to Keep in Mind While Investing in Real Estate

The decision to invest in real estate is a significant one for any investor, and it is also a costly investment. Unlike the majority of other investments, real estate has significantly less liquidity. Therefore, prior to making a purchase, the investor must conduct extensive research and checks to avoid making costly errors. In this article, we’ll read about 5 Things to Keep in Mind While Investing in Real Estate.

5 Things to Keep in Mind While Investing in Real Estate

Here is a list of considerations to keep in mind when searching for the ideal real estate investment:

Examine your financial status.

This may seem obvious, but not every investor considers his future earnings and financial stability prior to investing. This is detrimental to lending institutions and puts the investor into debt without his knowledge. Present and future cash flows should be considered first. Next, a list of all outstanding loans should be considered prior to taking out another loan against the property. Before entering the real estate market, it would be prudent to pay off other loans, such as student or medical loans.

The investor should then determine if he has liquid funds available for the down payment, which is typically 10 percent of the property’s value. Before signing the loan documents, the investor should choose an appropriate loan structure, a suitable repayment period, and reasonable EMI payments. Read more about investment property loans.

Check the title deed and seller’s background.

It would be prudent to conduct a background check on the seller/developer once you are leaning toward purchasing a particular property. In the case of a private seller, his identity and title documents, as well as succession certificates, partition deeds, wills, and gift deeds, should be verified.

In the case of purchases from corporate developers, it would be prudent to investigate their investors, financial statements, and the property’s compliance with all legal requirements.

Perform a benefit-cost analysis

When it comes to investing in real estate, there are two forms of cost-benefit analysis. First, if you are currently renting and considering purchasing a residential property but have not yet made a decision, it would be prudent to conduct a rent vs. buy cost-benefit analysis. What would each scenario’s monthly cash outflows be? What tax benefits are available? How long do you intend to reside in that location?

If you are considering purchasing real estate as an investment, you should conduct a cost-benefit analysis in terms of cash-down payment versus loan, the term of the loan, tax benefits on loan, anticipated appreciation over a specific time period, etc. It would not be prudent to invest when the costs outweigh the potential returns. Check the fire calculator.

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Check all documentation

As stated previously, once the buyer verifies that the seller’s title is clear, all other documents must be verified, including the encumbrance certificate, khata certificate, power of attorney, conversion certificate (if agricultural land is converted), etc. These documents should be reviewed by attorneys. If the property is being developed by the seller, the development agreement should also be verified.

Other essential documents include the completion certificate and the occupancy certificate. The completion certificate certifies that the building/project has been completed in accordance with the city’s standards and has not violated any regulations. The occupancy certificate confirms that the property can be occupied because it meets all of the approved occupancy requirements. Before making an investment, it would be prudent for the buyer to have the completion certificate and the occupancy certificate (if the property has been constructed).

Check all approvals

All developers must register their projects with RERA (Real Estate Regulatory Authority) in accordance with RERA (Real Estate Regulatory Authority) regulations, and it is the buyer’s responsibility to verify that RERA’s provisions have been adhered to. The buyer must also confirm that the seller has obtained all other approvals mandated by the local authorities and that all tax obligations have been paid to the municipal body without default.

In the case of real estate, the buyer should proceed with caution and keep an eye out for any red flags that could cost him in the future. Real estate continues to be one of the best investment opportunities in the country, particularly investment in land that appreciates substantially over time. We hope this article, read about 5 Things to Keep in Mind While Investing in Real Estate.

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