Tips for Profitable Real Estate Investing

Rishabh Siroya, President - Elect, Naredco NextGen shares his advice on real estate investing. Even though the market is brimming with alternatives for financial investment, most of which guarantee assured returns, more than often it becomes quite challenging to draft an effective action plan when it comes to taking wise decisions about investment and property business. Experienced real estate investors who have spent decades in the sector believe that the first rule of investment in property is to start by making a plan. One must do his ground work well and commence only after he has learnt the basics as it is rightly said ‘Strong Foundation- A Road to Success’. It is also often said that consider real estate investment a business, because then one would always remember that just like other businesses, realty investment too requires focused groundwork, execution and management. And, just like most productive and successful businesses are run by skilled people at every level, realty investment too requires expertise. Even though it can be management-intensive, it is advised to gain insights about real estate investment before relying on an advisor. Often, paid advisors like wealth managers or even brokers offer an all-purpose point of view without paying attention to the precise needs and priorities of the consumer. So, it is prudent to make your plan as per your requirements and manage on your own. The second most crucial point is to get a decent knowledge about the market where you are planning to invest because every market has specific characteristics of its own and the investment opportunities vary from market to market depending on its specifications. For example, the local market that you have chosen might not be very profitable for rentals but it could be good for flipping and capital appreciation. So it’s best to know and understand the nature of the market, the neighbourhood and then the revolving pros and cons. Like developing localities offer countless prospects and profitable incentives for investors. Recent data suggests that investors who purchase properties in emerging neighbourhoods make the most profit on their investment. Another important point to consider while investing in real estate is to ‘never over-leverage’. It is vital to make all calculations beforehand because it is likely that you may be successful for a long time but still suffer financial damage if the mortgage is too high. Many investors trust the thumb rule of setting 50% of your budget aside, even more so if you are new to realty investment. So, it is important to keep some investment financed so that you can enjoy a good blend of safety while enhancing your resources and assets. While people often plan big investments as they get more profit in return, one must trust on the numbers of the inflow to finally decide on the property to invest. It is better to begin from a smaller apartment and grow into bigger projects than signing up for a much bigger project and falling back on the payments. One must learn how to make sure the investment has positive cash flow. This can be determined if after disbursing the EMIs, you still have positive cash flow. Then you can reap the tax benefits without hampering your day-to-day lifestyle. Last but not the least; one must always keep multiple exit strategies. If you are just starting out and do not have excess capital, you must diversify your investment into different properties of smaller budgets to mitigate the risk factors. So, despite all the haze around real estate investment it is one of the best ways to create wealth while growing your assets and building new ones.