Everyone pretty much knows the first rule of real estate viz. Location, Location, Location! Though this aspect holds true for all retail customer-facing businesses it matters even more for investors in real estate.
When you want to calculate the value of a property, location is the most important factor. Which is why when you want to invest in property in Mumbai or anywhere else for that matter you must be intimately familiar with the neighbourhood that you are buying in.
If you are a home flipper then it matters all the more because you are not just buying the property for your own use but you want to sell it for a profit later. Ask yourself the following questions. Is the area that you plan to buy your property an area that attracts senior citizens or young families? Is there a long commute to the central business districts and office areas of the city. These kind of questions will help you become aware of the kind of people who would want to buy a house in the area. This knowledge of the profile of potential buyers will help you highlight the features of the property when it is time to market and sell the property.
Look for Positive Features
When it comes to buying a house, most people all over the world seek the same qualities: safety, convenience and good neighbours! When you are shortlisting locations for a potential investment property do focus on suburbs and neighbourhoods with the below desirable features:
- Easy access to highways and bus stops, rail and metro stations
- Good schools in the vicinity
- Good shopping centers, malls and restaurants nearby
- Low crime rates
Think about more such points about what other amenities and conveniences home buyers would want near their house and make sure that the property you are investing in ticks all the right boxes.
Make a list of all the services that you yourself use regularly – your potential buyers will need those services too! They will want the same type of stores and service providers near their house. No one wants to live in a secluded area where it takes an hour for the pizza delivery person to reach the house! Do make sure that atleast some of the below conveniences are within atleast a km from the potential property.
- Petrol Pump
- Grocery Stores
- Hsopitals / Nursing Homes
- Pediatricians / Clinics
- Daycare Providers
- Parks & Gardens
Other positive features surrounding your property include good local restaurants, multiplexes and internal amenities within the apartment complex such as gyms and open areas where children can play. We have seen that ample space within an apartment complex where residents, children and senior citizens can walk, play and work out have special value during times of emergency such as the time we have seen during the Coronavirus pandemic.
The Importance of Schools
Almost 75 % of Indian homebuyers have children under the age of 18 residing with them. Having good schools near your property can make or break your house’s selling potential in the market. Good highly ranked and desirable schools situated close to your property and catering to the middle and upper middle classes can add lakhs of rupees to your sale price and attract more potential buyers. Even buyers who do not have children will consider buying homes near good schools because they are also likely to sell the house at some point and know that good schools in the vicinity add to the value of a property on the market.
Why Schools Impact Property Values
Homes situated in good school districts tend to have higher sale prices and also tend to hold their prices even during a downtime as compared to homes that do not have good schools in their vicinity.
Looking for a Spark
When you are hunting for a good property to invest in and one which can give you good returns when you sell it, always look for neighbouhoods where people want to move into. Look for neighbourhoods which are improving and where positive change is expected in the form of new infrastructure such as Metro Lines and new upmarket constructions. If you can research the places where growth is happening in new and exciting ways then you can get a good deal on a house before the area catches on with buyers. For example in Mumbai if you can do some research and get your hands on the blueprint of the upcoming Mumbai coastal road that connects South Mumbai all the way to distant Kandivali you can automatically predict the areas that are expected to go up in price thanks to the proximity to exit lanes of the Coastal Road. This is just one example of the “Look for Sparks” kind of thinking! The idea is to spot the sparks before other lazy investors invariably catch on. This is where a Real Estate Agent can be a good ally because the agent knows where the sparks are happening in any given city!
Indicators of Growth
You will never find any signboards or hoardings announcing that a neighbourhood will soon see a spurt in growth! There are some factors that can however be of help to you in identifying up-and-coming neighbourhoods that are ripe for investment. Look for areas that have:
- Constantly increasing rents
- Metro Lines and Stops Added
- New Highways and Roads being built
- A trend towards Younger Demographics
- Major Retailers Moving nearby
Avoid Negative Catalysts
Just like in any city there are areas that have “sparks” and where growth spurts are happening there are areas that are getting impacted negatively. Certain events can trigger mass exodus from an area which can result in low housing prices which in hindsight can seem like a bargain to you. But when you realize that these low prices have more to do with negative catalysts you can quickly get stuck with inventory that will not sell! If you suddenly see large drops in home prices in a particular area that should be a cause for alarm. The reasons could be many such as:
- A major local employer is shutting down. In tech and industrial centers like Bangalore, Gurgaon and Pune, big tech companies employ thousands of employees at their offices. Any of them shutting down their offices can cause large scale disruptions and ripples in the residential market, the effect of which can be felt for years to come.
- Large increase in the number of crimes.
- Increased Flooding
- Sudden Drinking Water Supply scarcity
- Decrease in livability of an area due to rising traffic, pollution etc.
To summarise this article, our advise to home investors and flippers would be to look at whole areas and neighbourhoods and not individual houses when you are doing your research for investing in properties. If you look only at houses and their sale price you will miss the bigger picture and become stuck with a home that refuses to sell!
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