Real estate is one of those asset classes, which is good to have for further diversifying portfolio. However, you need a big pocket to bear the cost of acquiring a real estate. Even if people have big pockets, there is a possibility that some might have no prior real estate investment experience. These people can easily get carried away by the profits and end up investing in real estate, which have not much to offer in terms of returns. Therefore, it is important that one should consider certain things before investing in real estate. Some of them are listed below:
Patience
In any type of investment, patience is the key to achieve your investment objective. As you know, Rome was not built in a day! Similarly, even while investing in real estate, do not expect it to do wonders in a short-term. Therefore, have a lot of patience while investing in real estate.
Research
Investment without a research leads to financial disaster. Therefore, before investing, it is important to do a proper research to get to the conclusion. There are a number of projects that come now and then and their sales representative appears sweet to hear and believe. Thus, it is important to do your own research before investing in them.
While investing in real estate, you should consider the amenities that the project is offering, builder’s history, quality of construction, location of the property and compare similar properties by other builders in the same area.
Risk
Risk factor is one of the major things that you should consider before investing, not just in real estate but also in other investment avenues. Though they are believed to be safer than other investments yet they are prone to inflation risks. Due to its low volatile nature, they tend to fall less and also surge less as compared to equities.
All in all, real estate investment lacks flexibility and is a costly affair, which gives less return as compared to equity. However, it is better to have it in your portfolio for diversification purpose. In the coming years, REITs are going to evolve that will open doors for retail investors to have an exposure to real estate as an asset class.
(Source: Dalal Street Investment Journal)
