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Investing in Real Estate: Catching up with changing trends!

by Christoffer H. Danielsen
Investing in Real Estate: Catching up with changing trends!

There is a British proverb, “Fools build houses, Wise men stay in it”. Owning a piece of land or buying your own home is a big achievement. It is considered a lifetime investment. Often, if you end up having more than one home, it considered that you are set to retire. Rental income should take care of your needs post-retirement.

Investing in Real Estate

If you have landed a lucrative job and are married, then the next best thing that people consider you to do is “buy a house”. Often, buying a house is a huge decision. It involves a significant outlay of funds. These days, it is customary to avail a home loan, which involves a monthly commitment towards the bank. Hence, you need to have a long-term perspective while buying a house.

More than it is a financial decision, it is a psychological decision. The trend may be changing, but even now, having a roof over your head is considered ideal. There is a sense of stability that life offers when you do not have to budget for home rentals. It is also considered taboo to throw away your money in rent, while you might as well use the same outflow towards and EMI.

Changing trends in Real Estate

Contemporary beautiful modern white house exterior, real estate investments

The real estate scene is changing quite a bit. From individual houses, we have come to apartments, villas and row houses. Similarly, investment in lands is in the form of villa plots, gated community, farming plots etc., Land is vanishing asset, this has led to many individuals lapping up the sale of plots.

Many professional real estate companies have entered this space. Over time, certain builders / real estate companies have built a reputation for themselves with on-time delivery. The due diligence can be easier in case of the reputed builder. Also, the formalities regarding borrowing of funds from financial institutions will be easier.

Another trend that is catching up is the investment through REITs (Real Estate Investment Trusts). Their workings are similar to that of Mutual Funds. This is considered a safe route to gain exposure towards multiple real estate projects. This proves to be a good de-risking mechanism. Also, the effort involved in terms of raising funds, due diligence is considerably lower. The outlay of funds will also be significantly lower.

Online portals for buying and renting

This is by far the biggest change that has put many brokers out of work. The online portals have taken the realty market by storm. The homeowners can put up advertisements for the sale of residential/commercial property or land. There are many online portals which provide access to a wide range of public.

This eliminates middlemen and brokers, who made a living out of getting the buyer and seller together. The online portals have also become quite interactive. They try to provide results / suitable properties by asking for relevant questions and preferences. This personalized approach was clearly missing in the case of brokers who were driven by their intent to earn handsome incentives.

Identifying the right advisory company

Real estate trading concepts,Home brokers and buyers signing a sale contract.

The right advisor or agent can make all the difference. The potential upside that you manage in your investments can be determined by the company that you associate yourself with. Many companies claim an unparalleled track record of brokering deals in the residential assets across the UK which have benefited their clients immensely.

Typically, these companies provide the following services –

  • Research
  • Asset Management
  • Valuation and Consultancy
  • Fundraising initiatives
  • Non-performing loan syndication
  • Legal Aid
  • Transactional execution

Companies cater to a wide category of investors –

  • Institutions
  • Funds
  • Banks / Financial Institutions
  • Housing agencies
  • Charities
  • Private Investors

Physical Real Estate Investment

Money bag and a house model on a white background, investment symbol

Based on research and advice, if you have chosen to invest in the physical real estate, there are few things to watch out for.

  1. Conduct due diligence: Firstly, check if all the papers are in place. A legal advisor should vet the deed if possible. Check the identity and track record of the other party. If it is a builder, look at the past projects and their delivery timeline. Ask all the right questions before you sign the dotted line.
  2. Raising funds: Any investment in real estate will involve a huge cash outlay. Almost all banks and financial institutions insist on ~15%-20% down payment, the balance can be borrowed. Ensure that you can provision the mortgage payments conveniently. The mortgage is a long-term commitment, always remember this!
  3. Prioritize: If you are looking for a home, prioritize your needs. It could be the proximity to the school, park, hospital, workplace etc., it is indeed a long-term plan, hence, keep the likely changes in the future in mind. There could also be other types of considerations such as security levels, the crime rate in the locality, help, and maintenance available etc., In UK official websites offer enough data for you to evaluate the areas that may be suitable for you.
  4. Waterside Realty: You may be keen to have a property with a sea view. These ‘sun and sand’ properties will come at a cost! Also, another pitfall you need to avoid is to ensure that the building/plot that is being sold is legitimate and has all the right sign-offs. It should not be raised on waterbeds which could be a potential place of havoc in case of a hurricane or flood.
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