Real Estate
The Beginner’s Guide to Buying Rental Properties
Real estate is one of the safest investments globally. Along with gold, it is one of the few sound investments in the current global economic scenario. Developers aside, even the low budget investors are looking to make their money count and commit to real estate. This is not a bad bet as real estate has produced quite a few of the worlds wealthiest.
As far as safe investments go, the same goes for Pakistani economy. 7 out of the 15 richest people in Pakistan have direct or indirect ties with real estate or construction.
Like every venture, it is better to be well versed with the nooks and crannies of the industry before diving in with millions of rupees.
Properties are divided into four categories:
• Residential
• Commercial
• Industrial
• Agricultural
Here are a few factors that will influence your decision making positively in the real estate business:
Research:
Before buying any sort of land, one must figure out the type of property they want to build. Each of the four has their pros & cons. It is always better to take assistance from a professional. If you have lived in the city your whole life and don’t know about the industrial or agricultural lands, buying such assets might not be for you.
Neighborhood:
The face value of the area makes a huge impact in the long term and short term profits of the rental property. The rental profits you wish to gain are reliant on the neighborhood, availability and the market value. Buying a rental property in a residential society means you might find long term tenants. If you buy a rental property close to an educational institute, you might find tenants who will leave after a short period of time.
Property Taxes:
Taxes are a key aspect in acquiring a rental property. One must ascertain that the taxes are not eating a big chunk of your profit. Taxes differ according to the type, acreage, zones and whether the property is self occupied or rented. Figuring out the tax beforehand will help you calculate your yearly profits and you will be in a better position to decide whether the property is worth the hassle.
Amenities:
Amenities go a long way in bringing large profits for you. For example if there are plans for malls, parks or cinemas to be built close to your property, it will give your property a clear edge. Similarly a clean area with lesser noise pollution will also be a positive sign.
Insurance:
Insured properties can save you from maintenance charges and national disasters. However they are an expense which will cut through your profits.
Whole sale properties:
These are the properties that are usually under construction or planned to be constructed in the near future. These are considered to be a more secure investment. According to the research conducted in the University of Cambridge, in a five year period, you will earn better profits with a wholesale property than in an already constructed house.
Location:
It is always preferable to purchase real estate close to your own residence. You can monitor, inspect and manage the property with ease. Real estate investments require attention. Threats like forced occupancy, theft and robbery are always looming around. So if your rental property is nearby, you can keep a check on things in a better way.
In conclusion, keep your expectations realistic. Treating the real estate investment as any other investment is cardinal to your success. Research, market savvy, shrewdness in decision making and patience are paramount. Spending your life savings on rental properties can be tricky but if done right, can be life altering.
