The Most Important Factors for Real Estate Investing

The Most Important Factors for Real Estate Investing

What’s the most important thing to look for in real estate? While the location is always a key consideration, there are numerous other factors that help determine if an investment is right for you. Here’s a look at some of the most important things to consider if you plan to invest in the real estate market.

1. Property Location

Why It’s Important
The adage “location, location, location” is still king and continues to be the most important factor for profitability in real estate investing. Proximity to amenities, green space, scenic views, and the neighbourhood’s status factor prominently into residential property valuations. Closeness to markets, warehouses, transport hubs, freeways, and tax-exempt areas plays an important role in commercial property valuations.

What to Look For

A key when considering property location is the mid-to-long-term view regarding how the area is expected to evolve over the investment period. For example, today’s peaceful open land at the back of a residential building could someday become a noisy manufacturing facility, diminishing its value. Thoroughly review the ownership and intended usage of the immediate areas where you plan to invest.

One way to collect information about what are the prospects of the vicinity of the property you are considering is to contact the town hall or other public agencies in charge of zoning and urban planning. This will give you access to the long-term area planning and make a determination of how favourable or unfavourable your own plan for the property is.

2. Valuation of the Property

Why It’s Important
Property valuation is important for financing during the purchase, listing price, investment analysis, insurance, and taxation—they all depend on real estate valuation.

What to Look For
Commonly used real estate valuation methods include:

Sales comparison approach: recent comparable sales of properties with similar characteristics—most common and suitable for both new and old properties
Cost approach: the cost of the land and construction, minus depreciation— suitable for new construction.
Income approach: based on expected cash inflows—suitable for rentals.

3. Investment Purpose and Investment Horizon

Why It’s Important
Given the low liquidity and high-value investment in real estate, a lack of clarity on purpose may lead to unexpected results, including financial distress—especially if the investment is mortgaged.

What to Look For
Identify which of the following broad categories suits your purpose, and then plan accordingly:

Buy and self-use. Here you will save on rent and have the benefit of self-utilization, while also getting value appreciation.
Buy and lease. This offers regular income and long-term value appreciation. However, the temperament to be a landlord is needed to handle possible disputes and legal issues, manage tenants, repair work, etc.
Buy and sell (short-term). This is generally for quick, small to medium profit—the typical property is under construction and sold at a profit on completion.
Buy and sell (long-term). This is generally focused on large intrinsic value appreciation over a long period. This offers alternatives to complement long-term goals, such as retirement.

4. Expected Cash Flows and Profit Opportunities

Why It’s Important
Cash flow refers to how much money is left after expenses. Positive cash flow is key to a good rate of return on an investment property.

What to Look For
Develop projections for the following modes of profit and expenses:

Expected cash flow from rental income (inflation favours landlords for rental income)
The expected increase in intrinsic value is due to long-term price appreciation.
Benefits of depreciation (and available tax benefits)
Cost-benefit analysis of renovation before sale to get a better price
Cost-benefit analysis of mortgaged loans vs. value appreciation.

5. Be Careful with Leverage

Why It’s Important
Loans are convenient, but they may come at a big cost. You commit your future income to get utility today at the cost of interest spread across many years. Be sure you understand how to handle loans of this nature and avoid high levels of debt or what they call over-leverage. Even experts in real estate are challenged by over-leverage in times of adverse market conditions and the liquidity shortages with high debt obligations can break real estate projects.

What to Look For
Depending upon your current and expected future earnings, consider the following:

Decide on the type of mortgage that best fits your situation—fixed-rate, adjustable-rate mortgage (ARM), interest-only, zero down payment, etc. Note that each type of mortgage has its own risk profile and you need to study each carefully. For instance, ARM includes mortgage rates that can change at any time driven by capital market forces and the borrower must accept any rate changes during the loan term.
Be aware of the terms, conditions, and other charges levied by the mortgage lender.
Shop around to find lower interest rates and better terms.

6. New Construction vs. Existing Property

Why It’s Important
New construction usually offers attractive pricing, the option to customize, and modern amenities. Risks include delays, increased costs, and the unknowns of a newly-developed neighbourhood.

Existing properties offer convenience, faster access, established improvements (utilities, landscaping, etc.), and in many cases, lower costs.

What to Look For
Here are some key things to look for when deciding between a new construction or an existing property:

Review past projects and research the construction company’s reputation for new investments.
Review property deeds, recent surveys, and appraisal reports for existing properties.
Consider monthly maintenance costs, outstanding dues, and taxes. Costs such as these can severely impact your cash flow.
When investing in the leased property, find out if the property is rent-controlled, rent-stabilized, or free market. Is the lease about to expire? Are renewal options favourable to the tenant? Who owns the furnishings?
Quality-check items (furniture, fixtures, and equipment) if these are to be included in the sale.

Vardhman Realtors has a one-stop solution to all your problems, we are available for your queries.

How much does a house cost in Surat?

We are an estate agent in Surat city since 2002, as per our experience the price varies as per following things:

• Location
• Age of building
• Project Developer
• Amenities provided
• Condition of property

So if you change any of the factors the price may vary for the property.

but still, we can say approx. rates of Adajan-Pal and Palanpore

• 40–50 Lakh for a 2BHK apartment
• 60–80 Lakh for 3BHK Luxurious Apartment
• 80 and above for 4 & 5 BHK apartments

But you still get any confusion we are here to help you with property search and recommendation, we make sure that our client gets the best available deal in the market that fulfills their requirements.

What is Recommendable? Purchasing a Property via a Broker OR from the Developer directly

• Purchasing a property through a broker saves time by providing absolute information whereas purchasing a property from the developer directly, demands both time and effort and also visiting all the projects is tedious and exhausting.
• The Broker is proactive and dispenses numerous diversity in projects of various developers, dealing in various sizes, places, conferring a wide spectrum of alternatives, whereas projects only from the same developer is bestowed, hampering the options.
• Under the broker’s guidance, right information of Title of Clearance is always provided whereas it is sometimes kept secretive in case of buying from the developer.
• Specific Re-Sale value is always stated by the Broker whereas under the direct developer communication the Re-Sale value is approximate.
• The Broker acts as an authentic source in providing all the legal information, Goodwill and Background of the project and its developer whereas there is no proper source for a buyer to collect information in direct buying process.
• Definite information of current market scenario is provided by the broker on the other hand it is concealed.
• The broker acts as a bridge between the two parties. Having said that, the broker usually resolves a matter arising between the parties, whereas due to absence of a mediator under buying directly from the developer, the parties may fail to dissolve the issue.

What is better on a Preferential Basis? Renting a Home OR Buying a Home

• Generally, the Interest Rate of  Home Loan is low, hence it is better to pay EMI rather than rent.
• The problems being faced due to frequently changing a rented property is minimized.
• Owning a property is mandatory in order to avail the value appreciation of property.
• Moving to and fro through a rented property lays impact on family members as well, they face problems in factors such as
  ~ Adapting to the frequently changing environment is difficult.
  ~ Troublesome for children to cope in the new schools. 
  ~ It is burdensome to set up the home from basic.
• Brokerage Charges are to be paid every time you change/shift a rented home.
• Bound by the terms & conditions of the Homeowner, freedom is hampered.
   ~ Freedom of Renovation
   ~ Consent of Homeowner in making changes.

How To Sell Your Old Home And Move To A New One: An Easy Guide

The process of selling your current residence and upgrading to a larger one can be both exciting and challenging. As a realtor with years of experience, I have seen many home owners navigate this journey successfully. Here are some essential dos and don'ts to help expedite the process and ensure a smooth transition.

One of the most crucial steps is to hire a reputable realtor/real estate agent. A knowledgeable agent will guide you through every aspect of the selling process, ensuring a smooth and efficient transition. Here are some essential dos and don'ts that your real estate agent will handle to expedite the process.

1. Conduct a market analysis:

Your real estate agent will conduct a comprehensive market analysis to determine the value of your home. They will compare your property to similar homes in the area that have recently sold, helping you set a competitive price that attracts buyers while maximizing your return.

2. Enhance curb appeal:

A good agent knows that first impressions matter. They will provide you with advice on simple upgrades like a fresh coat of paint, well-maintained landscaping, and clean driveways to make your home more appealing to potential buyers.

3. Stage your home:
Staging your home can significantly impact the speed of your sale. Your agent will either help you with staging tips or recommend a professional stager who can arrange furniture and decor to highlight your home’s best features, making it easier for buyers to envision themselves living there.

4. Market your property effectively:

Your agent will create a robust marketing plan tailored to your property. This includes listing your home on major real estate websites, leveraging social media platforms, and using high-quality photos and virtual tours to attract a broad audience.

5. Be flexible with showings:
An experienced agent understands the importance of making your home available for showings at various times. They will manage the scheduling, ensuring your home is accessible to potential buyers, increasing the chances of receiving offers quickly.

6. Highlight energy-efficient features:
In today's market, energy-efficient homes are highly desirable. Your agent will identify and highlight any green features of your home, such as solar panels, energy-efficient windows, or smart thermostats, as attractive selling points.

Guidelines To Diversify Your Real Estate Investments

Buying a second home in a different city can be an exciting way to diversify your investments and create a new getaway. However, it also comes with unique challenges due to differences in local laws, regulations, and property procedures. To make the process smoother, it's essential to understand and navigate these differences effectively.

Local regulations: what you need to know - One of the first things to consider when buying a home in a different city is the variation in local regulations. These can include zoning laws, land use restrictions, environmental rules, and different rates for stamp duty and registration fees. For instance, some cities might restrict the purchase of agricultural land to local farmers, while others might have more relaxed rules. Costs like stamp duty can also differ significantly from one city to another, which can affect your overall investment. Understanding these regulatory details helps you avoid legal issues, reduce costs, and make informed decisions about your new property.

Identifying key regulatory bodies: Another crucial step is identifying the relevant regulatory bodies and authorities in the city where you're buying. Different cities may be governed by various entities, such as municipal corporations, development authorities, or local councils. These bodies are responsible for tasks like approving building plans, issuing occupancy certificates, and ensuring compliance with local building codes. Knowing who to deal with is essential for obtaining the necessary approvals and avoiding legal troubles. Being familiar with these authorities ensures you meet all legal requirements, reducing the risk of future disputes or penalties.

Ensuring the property is debt-free: Before finalising your purchase, it's essential to confirm that the property is free from any financial encumbrances. This involves thorough due diligence, such as reviewing the title deed and obtaining an encumbrance certificate. This certificate will reveal any past transactions involving the property, including whether it has been mortgaged. You may also need to check with banks or financial institutions to ensure there are no outstanding loans tied to the property. Skipping this step could result in buying a property with hidden debts, leading to significant complications. Ensuring the property is free from encumbrances protects you from potential legal and financial issues related to outstanding debts.

Navigating the ownership transfer process: The process of transferring property ownership can vary depending on the location. It may involve securing a clear title, obtaining necessary no-objection certificates (NOCs), and registering the sale deed with the local authorities. Some cities may also have specific restrictions on who can buy certain types of property, such as agricultural land. Being aware of these requirements is crucial for ensuring a smooth transfer and avoiding delays or complications. Understanding the local requirements for property transfers helps you navigate the process smoothly, ensuring a legally sound transaction.

The value of a local realtor: Hiring a knowledgeable local realtor can make a big difference when buying a second home in a different city. A local realtor understands the market dynamics, has in-depth knowledge of the area’s regulations, and often has strong connections with local authorities and financial institutions. They can also recommend competent lawyers who can help with title checks and documentation. Their expertise can help you avoid common pitfalls, ensure compliance with local laws, and make the entire process smoother and less stressful. A local realtor’s expertise can significantly ease the complexities of buying property in a new city, ensuring a successful transaction.

Conclusion: Buying a second home in a different city can be a rewarding experience, but it requires careful consideration of several key factors.
By understanding local regulations, identifying the right regulatory bodies, performing thorough due diligence, navigating the transfer process, and leveraging the expertise of a local realtor, you can confidently manage the complexities of buying property in a new location and enjoy your new home with peace of mind.

Navigating the complex housing market; dos and don'ts

Choosing the right professional realtor (also referred to as a real estate agent or a real estate broker) can make a significant difference in your home buying or selling experience. With the expertise, market knowledge, and negotiation skills that a professional realtor brings, you can navigate the complex real estate market with ease. Here are some essential guidelines and tips to help you identify the right realtor to assist you in your home sale or purchase.

Check credentials and licensing: Ensure that the realtor you consider is licensed and in good standing with their regulatory body. In India, real estate agents must be registered under the Real Estate (Regulation and Development) Act, 2016 (RERA). Check their credentials, certifications, and any professional affiliations, such as membership in the National Association of Realtors India (NAR-INDIA), and its member associations, which signifies a commitment to ethical practices and continuous professional development.

Evaluate experience and market knowledge: Experience matters significantly in real estate transactions. An experienced realtor will have a deeper understanding of market trends, property values, and neighbourhood dynamics. Ask potential realtors about their experience, particularly in handling transactions similar to yours. For instance, if you are selling a luxury home, find a realtor who specialises in high-end properties and has a good network of high net worth clients. Furthermore, their familiarity with the local market conditions can provide valuable insights and help you set realistic expectations.

Seek recommendations and read reviews: Word-of-mouth recommendations from friends, family, or colleagues can be invaluable. Additionally, online reviews and testimonials can provide insights into a realtor’s reputation and client satisfaction. Look for patterns in the feedback to gauge their reliability, professionalism, and effectiveness. Don’t hesitate to ask for references from past clients to get a firsthand account of their experiences.

Assess communication skills: Effective communication is crucial in real estate transactions. Your realtor should be able to explain complex processes clearly, respond promptly to your queries, and keep you updated regularly. During your initial interactions, pay attention to their responsiveness and willingness to address your concerns. A realtor who listens carefully to your needs and preferences can tailor their services to better meet your expectations.

Analyse their marketing strategy: For sellers, a realtor’s marketing strategy can significantly impact the sale of your property. Inquire about their approach to advertising, online listings, open houses, and use of professional photography. A proactive and well-rounded marketing plan can attract more potential buyers and expedite the sale process. Ensure that their strategy includes a mix of traditional and digital marketing techniques to reach a broader audience.

Understand their network: A well-connected realtor can offer additional advantages. They often have a network of other real estate professionals, including home loan vendors, interior designers, architects, home inspectors, and contractors. These connections can streamline various aspects of the buying or selling process, ensuring a smoother transaction. A realtor with a strong network can also provide valuable recommendations and resources that you might need along the way.

UnReview their track record: Ask for details about the realtor’s recent transactions, including the average time properties were on the market and the final selling prices compared to the listing prices. This information can provide insights into their effectiveness and market expertise. A consistent track record of successful transactions is a good indicator of a competent and reliable realtor.

Consider their negotiation skills: A skilled negotiator can secure better deals, whether you are buying or selling. Discuss with potential realtors their negotiation strategies and past experiences in handling difficult negotiations. Their ability to advocate effectively on your behalf is critical to achieving your desired outcomes. Strong negotiation skills can make a significant difference in the final terms of your transaction.

Gauge their personal fit: Finally, the personal fit between you and your realtor is essential. You will be working closely with this individual, so it’s important to choose someone you trust and feel comfortable with. A good rapport can enhance communication and collaboration, making the entire process more enjoyable and less stressful. Trust your instincts and choose a realtor who demonstrates professionalism, integrity, and a genuine interest in helping you achieve your goals.

Gauge their personal fit: Finally, the In conclusion, selecting the right professional realtor involves careful consideration of their credentials, experience, communication skills, and personal fit. By following these guidelines, you can find a realtor who will not only meet your expectations but also provide valuable support throughout your home sale or purchase journey. Remember, a great realtor is an invaluable partner in navigating the complexities of the real estate market, ensuring a successful and satisfying transaction.

(The author is Vice-Chairman and Chair-Global, NAR India)