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Westhill Consulting British Colombia, Hong Kong, Jakarta, USA

Five things you must Avoid while investing in real estate

Real estate investing has given mind-boggling returns over last 10 years. However one should be careful while investing in real estate. Here are some useful tips that can help you be a sane investor in real-estate. 

There are certain rules applicable to everything we do in our daily lives. The whole idea behind this belief is to fetch the maximal benefits, along with guarding ourselves from any kind of associated risks.

In that respect, our personal finance management is not distinct either. A number of aspects in our everyday financial matters involving loans, investments, taxes, credit cards, etc. are directed by some definite rules. Let us learn about some prohibitions that is, things we must not do while investing into real estate.

1. Say NO to very frequent switches in properties:

People tend to sometimes trade with the real estate investments. Rather than retaining property after purchase, people buy/sell them too often. This high frequency of trading can prove to be worthless. Wondering how? There are no tax benefits retrieved whenever property is sold in a short period of time.

2. Do not invest into an unfinished property:

Delay in the complete construction of property is an instance that is too common to happen and is seen often. Postponing the property’s date of completion has become an industry norm that keeps repeating on a frequent basis.

3. Do not broaden your budget too much:

Property purchase can cost you a lot, really a lot. It involves not only putting in all the money saved till date as down payment, but also paying a huge portion of our income as monthly EMI for years to come. This can jeopardize many of our other serious and important commitments such as, a medical emergency or children’s higher education, not to forget our daily expenses and small luxuries.

4. Avoid too much investment in real estate:

Most of us are big fans of property, gold, or big bank deposits. We generally overlook asset classes such as bond funds and equities. Also we have many misconceptions about investments in property. Here is one - property prices increase at a much faster rate compared to gold and other financial assets. This belief is one reason why most people end up investing entirely, or corpulent sums in property. This leads to negligible amount of money invested in other investment assets.

5. Don’t jump into real estate investment before seeing your big picture

What generally investor considers before investing in a property? Their repaying capacity, loan eligibility and property details… Is this enough?

This may not be enough. Because of this additional property investment, your money is getting locked. To service this loan, your retirement may get postponed by a few years. Therefore before taking real estate investment decision it is better to consider your big picture in the form of a comprehensive financial plan. That will hep you take a right investment decision.

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5 replies
To avoid all of these things, the best way is to have someone deal with these things to you to explain further. There are many great professionals there who can help you in your baby steps in investing in real estate. You have to review your options and not depend on yourself all too often.
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Not to mention the loans you have to pay for when you are investing into real estate. There really is a lot of risk in this
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Appreciate the article. I wasn’t really able to read all the stuff but I scanned most of it. I got really good stuff out of it though.
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Just a question that I have thought of, should you get a lone once you choose to a real estate investment? Or is it okay for you to pay in cash?
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It is good to have your own business, though despite the income that you get from the tenants.
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