Mumbai being the financial capital of India is continually attracting investors for residential and commercial spaces. Various areas in the city are constantly attracting investors for residential rental spaces. The city that is considered great for investment opportunities considering the potential price appreciation. Housing and real estate have always been a preferred option for investment. Off late, the commercial development sector has been attracting investors due to the long tenor generating capabilities of rental spaces. Real estate is considered a great investment option as it can generate ongoing passive income and is considered a long-term investment provided the property value increases over time. Although the real estate market is constantly growing, one must bear in mind that it requires a significant amount of upfront investment. Purchasing a property can be an expensive and complicated affair. Overheads and maintenance cost must be taken into consideration. If owners are planning to rent their apartments out to tenants, the potential income gaps should be taken into consideration.
Investing in the real estate market is a great option provided investors take the time out to educate themselves about the process and the best ways to receive great returns on investment. One of the best things about owning a rental property is that the longer one owns them, the greater the return on investment is. Real estate is a good investment as not only does it offer appreciation but also consistent cash flow. Cash flow increases overtime without eating into the principal investment of the property. Real estate investments are like an investment in stocks, except for the fact that unlike the stock market, one never has to wait for the property value to increase in order to make great returns. As the cash flow begins to increase and the rents increase due to inflation, the mortgage payments remain the same.
Given below is everything you need to know about the real estate market and whether or not it is the right choice for you:
• Borrowing Money
Many a time, financial experts warn against borrowing money to invest in properties. This must be considered before one begins to look into the property investment market. Investors must make sure to at least be able to afford mortgage payments if not the investment amount for purchasing the property. Rentals provide for a high turn-over, but There also might be a time when there are no tenants for the property. If the mortgage payments cannot be afforded without the rental income, it might become more of a financial burden than a profitable investment. Furthermore, defaulting on mortgage payments will lead to damaging credit in the long run.
• Mapping Out the Expenses
When purchasing a property for the purpose of investment, taxes, utilities, maintenance and other overhead costs must be taken into consideration. Turning to an agency for additional help in keeping track of the maintenance and other property-related costs is an easier way to maintain a property, especially when owners are too occupied to oversee the same. The property must be priced accordingly so the additional costs, insurance and other property expenses are covered by the rent. Since renting out property is a long-term plan, the first few months of rental received from the tenants should be saved in order to cover the long-term expected and unexpected costs of the property.
• Research, Research, and More Research
If an investor is looking at purchasing a property that they wish to sell at a later date, the property deed must be researched better than just well. Furthermore, the potential growth of the area in which the property is located must be taken into consideration, too. Circumstances such as any upcoming plans by the government to build new roads, airports, train stations etc. must be carefully considered before purchasing the property as changes like these might affect property value. Situations like festivals, infrastructure work and monsoons must be taken into consideration as well, as Mumbai is well known for the fun, frolic, noise and chaos during festival celebrations. Such instances could be a deal-breaker or a deal-sealer as the property values might fluctuate depending on surrounding factors. Once extensive research has been done on the location and property, investors must take into consideration the fact that investments, however promising, are always a potential risk.
• Small Steps
Many real estate investors over-estimate the value of the property and themselves as investors, and set foot in the investing game with the purchase of duplex houses or apartments with additional balconies and amenities that that might require additional high costs to maintain. While doing so is fine, the fact remains that not many tenants are able to afford Spaces that come with a huge rental tag. Indeed, there are companies that the apartments can be sublet to and where the company houses their senior employees but the number of such tenants varies to a great extent depending on the demand. Additionally, the costs and other overheads might end up surpassing the budget, and so as an investor, a smart choice would be to have the mortgage covered from the very beginning so one can need not have to worry about any losses. Once an investor warms up to the process of doubling up as a landlord, and managing and overseeing the functioning of the property, they may consider investing in larger properties that would need additional income. Once they get into the groove, investors find it easier to purchase and manage properties that will yield higher returns on investment.
• Real Estate Provides Better Return On Investment
When the market value increases, the property value of a home soars high, too. As a result, owners build equity. Real estate provides more control on investments as property is a tangible asset that can be leveraged to capitalize on numerous streams of revenue.
Sometimes, investors make the mistake of investing in properties for the sake of appreciation but with negative cash flow. Cash flow is essential as it gives investors the opportunity to purchase more properties and invest in other assets. Negative cash flow puts an investor at a fix when it comes to the overheads and maintenance costs thus, putting them at the risk of long-term losses.
Stepping into the real estate business requires money, time, effort and ambition for the idea to materialize. Real estate is a vehicle for generating reliable sources of income. However, before investing, investors must take into consideration all the factors related to investment in the real estate market. While investing in the real estate market, it is also important to know that the value of the property is all about the stream of income and the return on investment. Venturing into the real estate market is considered a profitable option by many as the market has the potential to yield an excellent return on investment and tax advantages, too.
If you are looking at investing in high end residential real estate in Mumbai, do not hesitate to get in touch with us for informed, educated and research-based advisory services on buying the best possible real estate to fetch you excellent returns in the years to come!