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Factors To Consider When Investing In Real Estate

Real estate market is ever-expanding as land prices are increasing with developing infrastructure and urbanization. It may seem like a market that gives you a larger profit at once, however entering into the market is not easy. It has its entry and exit barriers, where you need to have strong capital capacity and also sound knowledge of the current market situation. If you are interested in investing in real estate, here are some important factors to consider.


The most important factor is ‘where’ the property is situated. If for residential purposes, proximity to work cities, availability of infrastructure facilities and amenities, peace and safety of areas, status of neighbourhood, scenic view etc. are some common factors to look into. For commercial buildings, proximity to customers, warehouses, market opportunities, freeways, tax-exempt areas etc. are important. The timing of your purchase and the immediate future needs to be scrutinized carefully. You might see a lonely left-over property that seems too remote from the city, however there could be government projects taken up to develop that area in the next 5 years. So if you let go of the property, you are up for a big loss and your financial advisor Cremorne will not be happy with your decision. Hence, having all market info and forecasting as needed is vital.

Valuation of property

All expenses you incur will depend on how much the property is actually worth. You need to ensure that you are buying a property at the right price, not a higher price an agent recommended with the intention of misleading you. You will need this valuation when obtaining finance for the investment, so talk to your financial planner on low cost methods. Moreover, the valuation will be used to determine listing price during sale, insurance premium, taxation amount etc. Some commonly used valuation methods are sales comparison approach where other similar property sales prices are compared, cost approach where all related costs minus depreciation are taken and finally income approach where the expected cash flows are looked at.

Purpose of investment

Considering the challenges in selling real estate freely, you need to be very clear on why you are purchasing a land. If you are planning on self-utilization and long-term use, then buying a property with less second hand value is fine since you are not planning on selling any sooner. If not, you need to find areas where land values increase faster than other areas so you can sell them off at higher margins. If you will buy and lease it out, you need to be prepared with handling tenants, legalities, repair work etc.

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