As the saying goes ‘the best investment on earth is earth’. Real estate investments have been making more millionaires than any other sector since decades. However, investing in real estate is not as effortless as it seems.
It requires in-depth knowledge and research. Moreover, numerous other factors help determine if the investment is right for you.
Whether it a plot, plot file, a residential building, or a commercial project; Here are the most crucial factors to consider before you make a move. More importantly, these will significantly affect the returns on your investment.
Market Valuation of the Property
Property valuation is imperative for financing during the initial stages of the investment. Namely, during the purchase, listing price, taxation, and insurance.
Establishing the correct property rate for the market can be tricky. However, this is of key importance in determining the returns on your investment.
Let us give you an example. If you buy property that costs 10% above the market rate, you automatically incur a loss of 10% right at the start of your investment. A wise move would be to buy below the market rate, especially in a downtrend market.
Do your Homework before the Investment
It is adequate to check the property prices from different sources before making a purchase. Moreover, with the technological advancement nowadays, it has become trouble-free and convenient to check the prices of nearby properties online to determine the market value.
For plots, check the prices of nearby plots and view the on-ground locations. See and evaluate nearby amenities such as parks and schools. Consequently, this will allow you to better determine the market value of the plot.
For starters, there are plots with a few drawbacks. Surprisingly, those at the society boundary or near obstructions are usually priced significantly lower than the market. Be careful before you make a move for these sorts of plots.
For houses and buildings, the construction cost, condition of premises, and rental income all add up to determine the value. Hence, check the construction costs per sq. foot, depreciation in construction of old buildings, and rental value in the vicinity.
Legal status of the property
Non-approved societies, fraudulent schemes, and mass-level scams loom upon the real estate sector of Pakistan. Hence, it is of utmost importance to check the legal status of the property and the society.
You need to be aware of the laws that apply to the vicinity you buy property in. It is ideal to hire a lawyer who has a deep insight so that he can walk you through the whole process effortlessly.
Moreover, it can be done by checking the websites of relevant authorities. Namely, LDA for Lahore, CDA for Islamabad, KDA for Karachi, and similar government authorities in other cities.
Imperative things to check are approval status, approval date, and the current objections placed by the authority before making a purchase.
Another crucial factor to keep in mind is to ensure the status of Phase and Block approval of any society. For instance, if phase-1 of a society is approved, it does not mean all other phases are also approved. Hence, after confirming the status of the society, the next step will be to evaluate the specific property which you plan to purchase.
Almost all of the societies have a property verification process in place. You can simply verify the property by visiting the society office and proceed for the verification process on the prescribed format of the society. Moreover, it is also ideal to check that the property in question has any outstanding dues with the society. If there are any outstanding dues, it is better to convey this to the property owner to clear those dues before finalizing the deal.
Make an Exit Strategy
Similar to any type of investment, planning for your exit strategy is the most crucial step. It will affect your capital gains on the investment. This strategy should answer the following questions:
When will you sell the property?
What did the location look like at that point of time?
Who will be the buyer of your property?
This is often ignored by investors and buyers as they are only focused on the developer or development highlight. Thus resulting in a loss or slow gain in capital investment.
Additionally, be sure to plan the time frame of your investment. In order to clearly define your investment time frame, frame it in 3, 5, or 10 years. It is important to visualize the location after x number of years.
The future development and accessibility of the society or project are of key significance. Often commonly ignored is the fact that who the buyer will be at the time of selling. For instance, if you are investing in an under-development society, your buyer can be the person who wishes to construct a house. On the other hand, if a commercial building is in question, it can be a new business or an established brand planning to open a new outlet. For a property with rental income potential, you can predict that there will be tenants who will be interested to rent it.
As the society or a project goes through different investment cycles, the best gains can be achieved when you focus on and plan your exit strategy based on the final end buyer.
CurryFlow’s Real Estate Advisor Pick for 2021: Sikandar Fraz
Sikander Fraz graduated From UMT (University of Management and Technology) in 2010. He began his career in Real Estate in 2015. Interestingly, his forte lies in real estate brokerage and real estate investment in the following areas:
- Lahore DHA
- Peshawar DHA
- Multan DHA
- Quetta DHA
For your real estate investments and all queries related to property dealing feel free to contact Sikander Fraz for professional aid.
Call or directly message at +92 322 4377603.