Property as a Wealth Management Tool

Given the uncertain times that we are in, one should always work towards being financially independent and be able to create wealth. In most of the investment opportunities one can start investing with small amountsand monitor the gains/loss on daily basis like that of shares, gold, FD’s etc. However one of the investment opportunities which are often overlooked is that of property. The main reason is that most people feel that oneneed to have access to good amount of money to start with but can’t put a value to the gains/loss instantly. However, this is not the case always.

Property investment is considered as long term investment option. So the wealth creation is generally fruitful when approached with the perspective that wealth accumulates steadily over time rather than by investing for a short term like in cases of shares. Property investment is a tangible investment. An investment in property has a physical presence that one can see, touch and control. The good part about property investment is that one can earn from its rent uniformly,even during the rise and fall of property market.  So, it is important to acquire the right asset at the right time,at the right location.

So, how does one identify the right asset, right location and the right time? Unlike buying shares where the value of a company is evident, real estate is more difficult in terms of pricing. There are chances that one ends up paying extra based on perception, or as it has been observed that if one is patient and is armed with the right knowledge, an investment in property also gives the opportunity to acquire an asset below its real market value. So, the key to success is research and right advice from professionals. The basic hygiene to keep in mind while investing in a property is to begin familiarizing with the locality, price range in that area etc. Once an idea about pricing of property in the identified locationis established, only then one can bargain to analyse the real worth of property. However while you may be in a Delhi, you may want to invest in an upcoming property in Bangalore, Hyderabad or elsewhere which is not in your area of influence. In times like this established professionals like MyFollo (hyperlink), can provide the real insight about which property to invest based on market intelligence, background of developers, location and legal aspects besides other factors. Also they are able to help choose a property keeping in mind the capital growth aspect. i.e. a property in certain area will have less growth rate as compared to other due to various reasons. One should keep the following in mind, while considering the property and its potential growth:

  • Infrastructure/amenities in the locality
  • Plan and timeline for the new infrastructure
  • The price trends in last few months
  • Potential rental income
  • Social security
  • Brand name associated or the goodwill of area
  • Loan facility on the asset
  • Age and condition of property and facilities

 

For calculating the total cost of the property one would have to consider other costslike increase in IDC (infrastructure development cost), registration cost, loan free, additional fees like maintenance,  parking and club fees etc. One should start investing in those projects which will give the possession in coming 2-5 years. In this way one wouldn’t have to give all the money upfront and also have sufficient time to plan of payment for the rest of the money. Also 2-5 years is a good time to invest the money in a property because in that period the value of the property will usually command a better price, because of infrastructure growth, better facilities, market places etc.

One thing to keep in mind, is that thebuying and selling cycle needs some time for the ‘property handover’. This leaves property investment option as mid-term to long term investment option.

Finally, one needs to be aware about the scope of liquidity in property investment. One just can’t sell property as easily as gold. However, rental income is also a good option which can help in taking care of EMIs or can be seen as a regular source of income. In short, one can earn regular money by using property as a wealth management tool, in form of rent but if the wish is to liquidate the investment, then consider it as long term investment option.

MyFollo” is an online real estate ecosystem bringing in change in the way online advisory and transactions are executed. Write to us at contact@myfollo.com  to know how we can help you.

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