Whether it is an official dinner or a family get-together, there is always a group of people who are talking about which investment option is the best. One the one hand, some follow the “high risk, high return” rule and consider stocks as the most profitable investment. Similarly, some possess a great spirit of entrepreneurship and argue that all of the funds should be invested and reinvested in business. On the other hand, the old and retired emphasis on having a safe side by owning land and an additional source of income by investing in rental property. In this blog, we will tell you why you should invest in real estate!
Whether you are an energetic youngster who loves to take risks, a passionate entrepreneur who is keen to grow his business or a risk-averse retiree who aims to get the maximum out of his savings to fulfill his needs, we have got you covered. Yes, you read it right! We tell you that you should invest in real estate regardless of your risk preference. Why? Let’s get straight into it!
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Types of Investments in Real Estate
In order to make informed decisions in the real estate sector, one must be aware of how real estate sector works in Pakistan. Let’s first discuss the main and most prevalent types of investment in the real estate sector of Pakistan.
1. Purchasing of files
One form of investing in real estate sector of Pakistan is that you purchase “file” of a future plot in a housing society or a shop or apartment in a mall. A file refers to buying a plot, house or shop on installments. It is a proof of ownership and typically contains installment schedule along with other details. Generally, you would purchase a residential or commercial unit on installments while the society is in the early stages of development. As the development process proceeds and balloting is done, a great surge in prices is observed. A great thing about purchasing of files is that you can always exit from the investment by reselling it in the market even before you have paid all the installments. This way you not only get the amount of your investment back but can also gain prevailing profit rate in the market. It is, therefore, considered a great option of investment among short-term investors.
2. Purchasing a property to rent out
If you are looking for a steady and consistent income without having to worry about constantly updating your portfolio, renting out an apartment or a house is the best option for you. You can buy a house, apartment, or a commercial property to earn regular rental income on it. You can even buy land, construct a house or a commercial shop and rent it out to earn consistent income on it. A major benefit of such an investment is that you don’t have to let go of ownership of your property. While the house, apartment or shop remains on your balance sheet as an asset, you continue to get a steady rental income which you can either spend or reinvest. This type of investment is common among people with high risk averseness and a need for a stable source of income particularly retirees.
3. Buying an open land
This type of investment in real estate sector is not that common as it is rare and need farsightedness. In this type of investment, one buys an open land in an undeveloped area with an anticipation to sell it later for future development projects. Investors who go for this approach often look for sound developers to sell their land for big and profitable projects. This type of investment requires a long term approach of an investor. For example; A person buys a land in the outskirts of main city with an anticipation that one day when the city will expand, the value of his land will also increase and then developers will be interested to buy this land on much higher profits. Such investments need experience and farsightedness of a person and are for a longer time horizon.
4. Purchasing plots for resale purpose
Purchasing a plot for resale purpose is one of the most common and profitable methods of investing in the real estate sector of Pakistan. According to this approach, you can buy a plot by paying its full price and hold it until the price rises high enough to give you your desired level of profit. Why is it always profitable? Well, most of the people opting for this type are passive investors who aim to invest their excess savings at the safest place which is unanimously believed to be land or any real estate property. This is why, they tend to hold their investments for a much longer time period as compared to an active investor resulting in high prices at the time of selling.
5. Construct a house and sell
A hands-on approach in the real estate sector is to buy land, construct a house on it and sell it with a high profit margin. The process of construction takes a lot of time, investment along with effort. Nevertheless, real estate investors, who opt for this investment, option often reap skyrocketing profits once they resale their property. The magnitude of profit margin depends largely on the expertise and experience of the investor. Usually, this approach is prevalent among developers and construction businesses.
Why invest in Real Estate in Pakistan?
Real estate sector in Pakistan has flourished considerably and is considered the safest mode of investment. We are here to discuss a few basic elements that one should be aware of before making an investment in the real estate sector. Just like any other investment, be it stocks, bonds, foreign currency or gold, you have got to do your research. An investment is only profitable if it is done right! Therefore, we cannot emphasize enough on two major factors, timings and credibility of project.
1. Importance of taking a timely decision
For investment in a real estate project to be profitable, timings matter a lot. There is a life cycle of each real estate project. The beginning is the time of low prices and high vulnerability. As development work proceeds, the credibility of project increases and so does the value of land. As soon as development work has finished and possession is granted, there remains a short window of opportunity to enter before the prices make a huge leap. Such a big leap occurs after the society is well-inhabited and people start living there. At this point, price movement becomes fairly slow and the project reaches a stage of maturity where mere capital gains is not a profitable option anymore.
2. Selection of the right property
Buying a land is not a piece of cake. Selecting a right, profitable property requires homework and the ability to foresee market situation. There are a number of factors that one should keep in mind before selecting a property for investment.
Sound developer
Make sure you invest in a land that belongs to a sound developer and has a good track record of delivering projects on time. The developers’ goodwill in the market and history of delivering timely projects plays a major role in creating the goodwill of their new project
Location
The area, where land is present matters a lot. Property present in commercial area is usually considered more valuable. In addition, people prefer to invest in those areas which are near to civic amenities such as Schools, Hospitals, Universities, landmarks etc.
Legal Status
To save yourself from loss, make sure you invest in an RDA or CDA (or the respective regulatory development authority of your city) approved society. Once a society receives an NOC, consider it a green signal for you to invest.
High Liquidity
Liquidity is the ability of an asset to be converted into cash. In layman terms, a project that has a high rate of selling/purchasing transactions in the market is considered to be more liquid. This is true for projects that have a good reputation in the market.
In order to assess when it is the right time of investing in a project, one must keep a close eye on development updates. Moreover, given your preference and budget, you need to analyze and choose which project is most suitable for you. Practically all of this becomes quite tricky and extremely difficult for a common person due to lack of access to the correct, relevant and updated information regarding upcoming projects.
Don’t worry, Islamabad Projects is here to make it easy for you. Our hardworking and diligent team gathers all the relevant information from authentic sources and brings it together for you so you can make an informed decision without any hassle, while sitting in the comfort of your own home. Follow us on Facebook for latest updates. We provide personalized investment advice tailored according to your personal preferences and concerns. Call us at +92 334 5557734 or send us an email at info@irealprojects.com for free consultation.
Advantages of Real Estate Investment
Investment in real estate is one of the most prevalent and lucrative investment options. It has a great potential of success, but of course if it is done correctly. It has numerous advantages over other investment options and investors can reap steady income as well as capital gains through real estate investments. Some of the salient advantages of investing in real estate sector are mentioned below:
Real estate investment provides great Financial Security
When compared to other mediums of investment, real estate is comparatively less risky. Investing in a land provides you with a tangible asset, and hence, great financial security. Regardless of financial market conditions, you can monetize this asset by simply renting or selling it out. This makes it far more resilient asset compared to traditional stocks or bonds.
Real estate investment ensures Steady income
Investing in a real estate sector is a win-win situation for the investor and end-consumer. Real estate investing, when done right, is a stable way to escalate wealth over a period of time. You can buy a property and rent it out to gain capital with the minimum effort required. It doesn’t just end here; there is substantial capital appreciation of the property at the same time for you to enjoy.
Real estate investment can be easily managed
Investing in real estate doesn’t demand too much of your attention if you choose a reliable and talented realtor. Unlike other investment options such as common stocks and foreign currency, you don’t have to continuously update your portfolio. For example, investing in stocks needs your utmost attention as you have to be very watchful of the fluctuation in prices. On the other hand, real estate investment has a longer span and one can sit back and enjoy rental income and profits, once investment is done in a good project.
Generate Passive Income through Real estate investment
Once you have invested in real estate, you can generate passive income by just renting out properties and these properties will work for you even when you are fast asleep. Real estate investors buy numerous rental properties that generate quite handsome income for them to cover their expenses and allow them to do what they enjoy, instead of sitting back at work for overtime. Isn’t it great?
Become an Entrepreneur by investing in real estate sector
Are you tired of your desk job and want to become an entrepreneur instead? There are quite a lot of ways to invest in real estate and become a boss. If you enjoy renovating and converting buildings into homes, you can purchase a house, renovate it and put it back on the market for rent or resell it. Gradually, you can start purchasing and selling rental homes, apartments and eventually buildings.
Real estate investment lets you provide Home for others
One of the overlooked advantages of investing in real estate investment is the pride in serving others by providing homes to them. Not everyone has the resources to acquire a home for themselves. Renting a home becomes their last resort. When you invest in a residential area, not only are you providing shelter to a family, but you are ensuring a safe, healthy and clean environment for them.
Value of real estate property can never go down to zero
Investment in real estate is fruitful as the value of land appreciates with time. Unlike a stock, real estate investments’ worth is never zero, not even during a time of recession. You can always sell a piece of land to get money.
Final Word of Advice!
Investing in real estate sector has countless advantages some of which have been mentioned above. Since a house is a necessity, the value of land can never go down. The older it becomes, the more valuable it is. Nevertheless, when investing in new and upcoming housing or construction projects, it is not uncommon to be caught in fraudulent schemes. Oftentimes, people get attracted to the low prices of new projects and end up throwing their hard-earned money in a project that will never be completed. After they realize that the project is not sound enough, there is no demand in the market and they are not able to exit.
Therefore, we emphasize on carefully choosing the right project and right time by consulting with your real estate agent. Islamabad Projects deals with clients every day and makes sure to provide best possible updates to them, so that real estate investors and end-consumers can make well-informed decisions. We want our customers to gain high profits by investing in a profitable property in a sound project.
Check out the Top Five Upcoming Housing Societies in Islamabad that are popular among investors and real estate consultants. If you are interested in malls with finished apartments and commercial shops, check out the Top Five Upcoming Malls in Islamabad.
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