Buying a property for investment is a big decision. One can find innumerable examples around him who would have made big money by investing into real estate. While such instances testify one’s decision to add property in the portfolio, there is lot that would need to be considered before one takes a plunge. Unlike other investment opportunities, buying a property is a bigger decision since it involved a large amount of money. More importantly, in a larger number of cases, even the investment would happen through picking up a loan which is a long term obligation.
So before taking the step towards investing in property, whether to resell it, earn rental or to even live in it, do consider the following.
No emotions to impact the decision
A large number of investors in real estate let the emotions run at large and impact the buying decision. Do not invest in the property just because you feel good about owing one which is better than other. The decision should be based purely on the logical reasoning and should be taken as you would take any other business decision without having your heart intervene in the process of arriving at a conclusion.
Extensive research is necessary
Do your research properly. Factors like location, property valuation over last few years, access to schools and hospitals, proximity to airport and railway station among others can be determinants of future price escalations. Security and convenience of access are other factors that may add to the value of the property in long run. Goes without saying that every property has a certain clientele. One must be aware of the requirements of the potential buyers and the same being met by the said property being evaluated for purchase.
Whether it is an apartment or a land, the investor must check if the same would qualify for a loan against property. If it qualifies for being excepted as a collateral, it is an indicator that the same is a safe investment.
Have you secured the down payment?
There are individuals who would want to set off the rent against the EMI. This can lower the burden of the monthly outflow. Over time the rent may even surpass the monthly outflow to the lending institution. While this can be a smart move, but the down payment needs to be funded by the buyer only. So do check the availability of the funds and budget accordingly. Hunting a property as per the funds available should also be one of the considerations. To put it simply, one should select a property that will suite your budget.
Check on your existing debts and obligations
The current debts can be a dampener and have the potential to throw away the process out of gear. So one must evaluate the existing debts and obligations. The obligations must also include any medical, education or any other regular outflow that may not be part of the debt but are important expenses that cannot be neglected. Careful evaluation of the available cash post all expenses will only help meeting the fund requirement and proper planning.
Would you need a co-borrower on loan
A co-borrower these days is preferred by the housing finance companies. While there is no restriction on the approval of loan without one, but a co-borrower does facilitate approval of higher loan amounts.
Check your credit profile
One must check the credit profile before even starting to look out for the property. Obtain the bureau report and check out the CIBIL score beforehand to avoid the shock of getting a rejection letter. This must be done even if one has been diligent in repayment of all loans and cards. The score gets impacted by various factors and repayment is just one among many. Also, the error rates have been a major cause for severely impacting the credit profiles.
Annual costs that come along with the property
One has to be mindful of the fact that each property comes with obligatory expenses. The maintenance, taxes and upkeep etc if not factored in advance can put a dent in availability of the funds.
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