Five Winning Ws of Real Estate Investment

Golden Rules of Profiting From Property

Irfan Razack, CMD, Prestige Group

Investing in real estate is a complex process with several aspects that can trip up the unwary or poorly informed investor. From my experience, I can tell that there are five questions that play a vital role in making or breaking a real estate investment. I call them the 5 Ws – Where, Why, What When & Whom. If you have clear answers to these questions and base your investment decisions on them, you are sure to emerge a winner.

The first and most important question is Where. In other words, the location of the property. This is arguably the single most important factor to consider when investing in real estate and it needs to be assessed in both the narrow view and the larger picture. The narrow view will take into account the property’s immediate surroundings. How good is its access? How close are amenities and what about the availability of water, power, and physical & social infrastructure, etc? The broader picture covers the neighborhood’s potential for appreciation. What is the current demand and potential for growth? What are the factors that are driving growth there? All these aspects need to be carefully considered before making your investment decision.

Next comes the Why of your investment. In other words, what is your objective? Do you want to earn a regular income by giving property on rent? Do you want to earn returns by reselling?  Do you want to build a portfolio of assets that give you financial security in the long term? Do you want to enjoy a quality lifestyle?  Or do you want a roof over your head that belongs to you? Generally speaking, plots or vacant sites are excellent as long-term investments and built properties are a great way of earning rental income and annuities. On the whole, both work well as assets that appreciate in the long term and as legacies, you can pass on to the next generation.

Based on where and why you now decide What you are going to invest in. Should you buy vacant land or a plot in a developed layout? Or for that matter, a residential apartment or commercial space? It all depends on the outcome you desire and the kind of finances you have. Generally speaking, commercial spaces yield higher rents but may also be more expensive Vacant land and plots on the other hand may be more affordable and show better appreciation in the longer term.

Talking about the question of When to invest, if you are looking for developed spaces- plotted development, villa community, or an apartment complex, one should invest at the pre-launch stage. Once the developmental work starts, the price tends to increase. But even if you invest in a project at the early stage of its launch, you can still get a good deal. Alternatively, it is rewarding to invest in the extension phase of the project early on.

The last W – Whom can arguably be regarded as the most important one i.e whom are you buying from?  In my early days in real estate, this was one of the biggest problems. It was extremely difficult to verify the genuineness of property ownership and /or the absence of any encumbrances on it i.e it had not been mortgaged or given as security. Many investors burnt their fingers and lost their money because they did not do sufficient due diligence before investing. These days property records are mostly digitized and easier to access. Therefore it is much simpler to verify the authenticity of the seller’s claims. However, as a matter of abundant caution and financial prudence, one must always get all the property’s documents thoroughly vetted by a competent legal firm before entering into any transaction. This again is not an easy task for an individual to accomplish. So, I would strongly recommend that you look for well-reputed organizations with time-tested credentials. This way you can make sure that your investment is safe and rewarding.

Ultimately, real estate is an excellent investment option that can both generate substantial regular income as well as be a high -appreciation long-term asset. Enter early, invest carefully, and benefit substantially. It’s that simple.