Wednesday, February 17, 2016

SELECTING YOUR REAL ESTATE ASSET

SELECTING YOUR REAL ESTATE ASSET


Like stocks, each property has its own peculiar plus and minus points.Yet it is not practical to quickly exit property once purchased, like you could in the case of stocks, because property is subject to high transfer charges, illiquid markets, indivisible investments, etc. So, carefully choose the property in which you plan to invest by doing your homework thoroughly.  Here are a few of the important criteria that you must mull over before investing in real estate.
Location:
In real estate, what matters the most is the location of a development.  Two developments, may be same in all aspect except the location, and takers for each will differ.Hence,location is of key importance while selecting where to invest.In fact, selecting the right location for investment is very essential to build a well balanced portfolio that will yield expected returns.Selection of location depends upon the property segment in which you wish to invest, i.e.commercial, retail or residential. The ability to choose an optimally located property gives an investor an edge over the others.
Here are some pointers that should guide you while choosing the location for your real estate asset:
1.It is advisable to identify a place where there is no slum, drainage line or a place of worship nearby.
2.The area should have well developed infrastructure and should be well connected with other locations by public transport.
3.Avoid property constructed in low-lying areas, as these are susceptible to flooding during the rainy season.
4.The location should enjoy proximity and accessibility to work places, a market place, schools, colleges and recreational centres, in case you choose to invest in the residential segment.
Infrastructure
Access to infrastructure facilities and amenities is one of the criteria that make a property prime. So, when you select real estate for investment purposes, make sure that the capacity of the surrounding infrastructure / water facilities, sewage and drainage, road and rail connections, electricity, etc.) is adequate to sustain the needs of the future population growth.
In most of the new complexes being set up or the residential projects being developed, club use and recreation facilities are being provided for:These could enhance the value of your investment.  But a word of caution here – these amenities add to the monthly outgoings.
Ready Possession versus under construction  
If you plan to invest in residential property, it is always more lucrative to invest in under-construction projects since in this case payments are staggered over the duration of the construction and there is usually a steady capital appreciation from announcement of a project to its completion.  So, for investors who expect capital growth in a short time frame, investment in under-construction property is the right option.  However, new buildings attract higher property taxes and maintenance charges and the loading (difference between net useable carpet area and chargeable built up area is also higher compared to older buildings.  The loading could range between 25-40 percent depending on the project.
For investors who are interested in holding assets that generate steady rental incomes, investment in ready possession property offers a better option.
The downside for ready possession property is the time required while marketing it for sale (generally considered around 6-9 months) and loss of rent suffered during that period. Further, the possibility of capital appreciation is very limited as ready possession property already attracts premium over market rates.
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Whitefield    
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