People earn money with a great deal of hard work and in due course of their lives, they are likely to make some real estate investments at some point in time. Real estate investments are certainly the biggest investments made by people. So one should be very careful while investing their hard earn money, and in order to avoid any discrepancy, everyone should keep certain guidelines in mind. This will not only make them invest correctly but also help them to make profitable deals.
Know your mortgage payment- In the simplest terms, a mortgage is a long-term loan which is designed to help you purchase a property by borrowing money from the bank where the property itself act as collateral. In return, the borrower is obligated to pay the principal amount along with some interest. Therefore one must be well aware of the market interest rates and the regular mortgage payment that are to be made by him/ her before applying for a loan.
Down payment requirement- Down payment is another key factor in the process of real estate investment. It is the amount of money given to the seller to reserve the property. In other words, it is the amount which acts as the token money. Properties like the L zone projects can be considered as suitable investing options due to their comfortable down payment plans. Also Before selecting a property for investment the buyer should take complete knowledge about the down payment requirements and make appropriate provision of the required money to save time.
Price to income ratio- The price to income ratio is a big determiner in the real estate investment, it refers to the expected income from the property in a ratio of its price or the money invested. In case the ratio is high the property is considered a good investment and if it is bad one should not invest in such a property.
Price to rent ratio – The price-to-rent ratio provides a comparison between owning and renting properties in a particular city For example if the price of purchasing a shop is extensively more than the annual rent of the same house, it is advisable not to buy the house and rent the same.
Gross rental yield – It is important for an investor to understand the concept of Gross rental yield. Gross rental yield is the significant rate of return on an investment to work out a rental yield, the weekly rent X 52 weeks, is divided by the purchase price.In the case of high profitable property, the gross rental rates are high. The rental rate is also indicative of the profitability of a land. It not only tells about the present profitability but also represents the future possibilities for a particular property.
Capitalization Rate – Capitalization rate is the rate of return on an investment based on the income that the property is expected to generate. The capitalization rate is used to estimate the investor’s potential return on his investment.
Cash flow – Cash flow is last but the most important determinant in the real estate decision. The inflow of cash that a particular investment is likely to generate is the major factor that buyers should keep in mind before making any strategic investment.