Wednesday, February 03, 2016

The Factors Behind a Good Real Estate Investment (Ahmed Kildir)

These are in my view the factors behind a good real estate investment. Every investor should keep these in mind while evaluating a prospective real estate investment. 

1. The hassle of buying

How easy is it to complete the purchase. People regularly investing in 2nd tier societies or farm lands can tell you that buying can be a trying experience. Tier 1 societies need to ensure that the buying process is smooth. A good example is DHA which ensures that your entire purchase is done in 1-3 days. Also, buying should be cheap. The developer and the government should not make it more difficult to buy by increasing buying costs, duties or taxes. It actually has a negative effect especially on smaller investors.

2. The hassle of selling

How easy it is to sell the property. This, in my view, is the most important part of the purchase. You should invest in a society which has a ‘market’ both locally and overseas – especially overseas as overseas investors tend to keep most of their savings in property instead of bonds (due to religious reasons) or stocks (high risk and the hassle of constant monitoring). If you actually have to ‘explain’ your investment to someone, it means not enough people have heard of it. This is why I have always invested in DHA as everyone knows DHA andBahria TownBahria Town too is a great investment but I strongly believe that Malik Riaz should solve investor issues in Karachi (illegal land), Lahore (Ring Road) and Islamabad (Enclave 2) before he launches any new societies (Bahria Sports City recently announced in Karachi). Credibility should not be compromised at any cost. DHA too has its issues but nowhere close to the issues Bahria is facing.

3. How safe is your investment

Investing in unknown developers with no recognizable ‘local’ history has a higher risk than investing in known developers. The known developers have a reputation to maintain. Any developer which is new to the real estate business in Pakistan should be very carefully assessed before handing them your hard earned money regardless of how big it is in its home country. An example would be Emaar which is big in UAE, Saudi and Egypt but has proven to be unreliable in Pakistan.

4. How big is your investment

Times are changing. 10 years ago there was a much smaller market for 5,8 and 10 marla plots. Now the market is much bigger for smaller plots as many entry level investors have access to it. Younger investors in their 20s and 30s have no problem investing in smaller plots thus creating a good demand. Older investors still tend to go for 1 kanal plots. I would strongly suggest investors to think big by buying small whenever possible.

5. How mature is your investment

I would strongly urge investors to invest in societies which are in early stages of maturity. A similarly placed 3 crore plot in phase 6 and a 2 crore plot in phase 8 will be the same price in the future of a 1 crore similarly placed plot in Prism. However, if you intend to build a home, Prism is not for you.

6. Location, location, location – need I say more?

7. What is the wow factor in your property?

When buying a property, think of how you will sell it to a future investor? How will you advertise it? Is it close to retail? Close to a park? Close to a mega project? Close to the highway? Good schools in proximity? A Is it a clean plot not facing a graveyard or a boundary?

8. Who is your dealer?

Always, always, always double/triple/quadruple check the reputation of your property dealer. Question him/her on everything. Do a lot of paperwork. A lot of dealers will ask you for key money in ‘cash’. This is where it can turn ugly. A lot of dealers will try to avoid your meetup with the seller/buyer so to avoid the actual property value and make money from the ‘key money’. Don’t involve cash and do all transactions in a traceable manner i.e. manager’s cheques, drafts etc. 

1 comment:

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