Real estate investment continues to reign supreme due to its inherent safety, predictability, and impressive return on investment. However, even experienced investors can fall a prey to common mistakes when they fail to fully explore the market. If you are contemplating real estate investments in 2023, it is prudent to steer clear of these common pitfalls:
Property price
One of the most pervasive mistakes is failing to have an investment strategy. Property investment is often a costly process, and it helps to have a plan before starting investing. Irrespective of how tempting a deal may be, you should carefully consider your options and see if the offer is ideal for your long-term objectives.
As a prospective property buyer, there are various factors that warrant careful consideration, including the property’s price, your individual requirements, maintenance expenditure, and potential for growth. For example, when considering the purchase of a property for rental income, prudent investors must carefully evaluate the property from the vantage point of potential tenants. Location, access to public transportation, and other factors must be assessed with an eye towards the preferences of various tenant types. Families may prioritise proximity to schools or safety, while college students or young professionals may place greater emphasis on access to nightlife and dining options. Strategic consideration of these factors is essential to maximising the property’s rental income potential.
Promising returns
Effective property investment entails meticulous evaluation of aspects like standard property prices and demand for rental properties in a given area. Proximity to social infrastructure is also crucial.
Investors are well-advised to bear in mind that exploring new avenues and considering a broad range of potential properties can yield solid returns. Narrowing one’s focus to a select few options may inadvertently disqualify lucrative opportunities, and ultimately result in missed gains.
Lack of foresight
When buying a property, many home loan providers offer flexible payment options. But inadequate financial planning can result in a monthly EMI that creates undue stress and depletes savings. To avoid this, it is imperative to thoroughly examine available home loan options and select those that facilitate flexible repayment, low EMI, and favourable interest rates.
Short-term results
A common mistake real estate investors make is a lack of clarity regarding the anticipated returns and investment timeframe. Real estate investing is a lengthy commitment, and seasoned investors typically suggest directing resources towards a developing property that will yield profits over time, rather than hastily pursuing a scheme that eventually results in financial setbacks.
Underestimating cost
Another common mistake property investors commit is underestimating potential expenses, which may include personal, health-related or property repair costs. It is highly advisable to establish a cap on your investment and allocate a specific portion of your funds for unforeseen expenses and emergency situations. This can pre-empt potential complications in the future.
Contingency plan
In the event that your first option proves unsuccessful, it is imperative to maintain a contingency plan. Unforeseen circumstances may arise that could hinder your ability to sell or lease the property. In such instances, it is advisable to plan for all potential outcomes, even in the event of a shortfall in your financial objectives.
The writer is Director, Aparna Constructions and Estates Pvt Ltd.
