The real estate sector of Pakistan attracts the interest of millions of people across the country. The secure, timely, and healthy returns of investment make this sector one of the most profitable industries of Pakistan. However, working in this industry is surely not a piece of cake. It’s something beyond buying at a lower rate and selling at higher rates. In order to gain handsome rewards, one should know the foundations of real estate investing. It not only involves various intelligent considerations but also a good amount of experience and basic financial understanding.
Today, we are going to guide you about how to perfectly use your capital and invest in the property market for best returns.
Basics of Investing in Real Estate in Pakistan
In the beginning, you should be aware of the fact that there is no perfect way to thoroughly define real estate investment. However, for the time being, we can state that the process of sale, purchase, or lease of property with the aim of capital gains is basically a real estate investment.
Essentially, there are several forms of real estate investment, but the ones practically more applicable to Pakistan’s real estate market are as follows:
1. Purchasing files
A file is basically a document about a plot in a society that is yet to be developed. This future plot in society has no allocation or possession for the time being. This document is favorable if you’re looking for a long term investment. Once the plot associated with your file become developed, the rates increase drastically. It means the returns linked with this file can be very high.
Purchasing a file can be a great option to invest in real estate with a little investment. All you need is to get them as early as possible.
2. Purchasing and reselling of plots at higher rates
Buying plots at lower prices with the aim of selling them on higher rates is one of the most common practices of real estate investment in Pakistan.
In this activity, investors buy plots and keep them holding until their prices mount up. This increase is subjected to the time and the development of the involved project. This technique mostly gives healthy returns and can be quite lucrative. All you need is to judge the situation wisely and stay patient until the right time came to release your property.
3. Purchasing property to rent out
Purchasing a property in the form of apartment, house or commercial property and renting it out is an income generating sort of real estate investment. You just have to sit back and enjoy the fixed monthly earning while your property value is also increasing day by day.
4. Purchasing open land foreseeing the development
This form of investment is comparatively riskier and a less-adapted sort of real estate investment. In this type, you need to take a bold decision by purchasing a property that has not developed yet or owned by any society. Usually, investors with good long-sightedness of the market opt for this strategy. They foresee that a developer will purchase from them in the future at higher rates to develop their project. At the moment, this strategy is largely trending in Gwadar.
Advantages & Disadvantages of real estate investment
As we mentioned earlier, investing your capital in the real estate sector is not everyone’s piece of cake. The real estate investment contains both, advantages as well as disadvantages. We advise you to solemnly to take the following aspects into your consideration before stepping in this area.
1. Chances of high returns in a short span of time
2. Ownership of a solid asset
3. In case of renting out, a constant source of income
4. Can utilize its worth in future personal use
5. A good asset to pass over to your generations
1. The fluctuating market, Prices may not go up as you expected
2. You will be entitled to paying property taxes
3. Property is not something that can be liquidated urgently
4. The possibility of a drastic fall in property value due to uncertain circumstances
5. Fraudulent practices or legal complexities may occur
What is the path ahead?
As a rookie in the property market, you may be confused or rethink that you don’t have the proper knowledge of the domain, so why are you going for it? Just relax. We will guide you about a few steps that are required to be considered for any successful investment in the real estate sector. Once you get them completely, you’ll be on your right path in the real estate domain.
The points to be considered are as follows:
1. Must be clear about your requirements
In the first step, you should be fully aware of your requirements. You need to go through in detail about why you’re making this investment, and what is your goal to achieve against it.
We highly recommend you to decide your holding power prior to making an investment. Holding power simply means the amount of time you are capable of holding your purchased property before opening it up for sale. Additionally, you should be very clear about your budget precisely, so that you can conduct the market research accordingly. Moreover, you’ve to decide whether you’re willing to make an investment in the city you are residing or any other city.
2. Conduct your market research
Once you become crystal clear about your requirements, conduct your market research. Check out the various available property options according to your need. Utilize effective mediums of resources in this regard. For one of the best real estate investment guide, you can easily access www.faizanbarai.com anytime.
Always remember to ensure that the property you’re interested in has all the relevant regulatory approvals. Check with the TMA, and make sure to confirm it prior.
Consulting a few real estate agents of the area is also one of the helpful activities you should do in your research process. By this practice, you can get fair know-how about the prices and demand trends of the area you’re interested in. This information will help you figure out how much the appreciation in value you can expect.
3. Purchase the property
After the initial research is done. Now you have precisely limited your options. Its time to go for purchasing. This is the high time to keep all the legal complexities in your consideration and obtain the relevant transfer and sales deeds verified by an experienced lawyer. Always go for the property with all relevant approvals to avoid any loss due to legal issues.
Always take note of the location and the current status i.e the stage of development of your plot. These factors effectively influence the timing that how soon the price of your property will rise.
4. Hold your property till the right time/Wait for a suitable tenant
This is one of the trickiest section of the real estate investment. This stage differentiates an experienced investor with an amateur one in the market.
There are various factors which impact or influence your decision regarding how long should you hold your property. These factors include but not limited to the general political situation, developers reputation in the market, Project’s current status, project location, and market trends. For example, Bahria Town is a well-known name among both local and overseas investors because of its good reputation in terms of quality development and reliability.
If you’re looking to make earn a constant and fixed income, renting out your property is one of the best options for you. For this purpose, there are a few considerations that you should remember before renting out your property.
Most importantly, there should always be a written signed tenancy agreement between both tenant and renter. This document ought to highlight the duration of the tenancy, the decided amount in terms of rent, and when it is payable on the renter, the rate of annual increment in the rent, and the terms of conditions of eviction in case you need the property for your own use or any dispute.
Make sure that the eviction part of your agreement must include what actions would interpret an instant eviction. The registration of this agreement with your local law enforcement authorities is necessary to avoid any future trouble. By registering this agreement with local law enforcement agencies, you can not be held accountable for any illegal practice of your tenant. As a matter of fact, the law enforcement authorities will make sure that the eviction takes place without any resistance by the tenant in case of any dispute.
5. Selling your property
This is the stage when you get the returns against your investment. The moment you feel that your property has touched the peak value potential, it’s the perfect time to sell it out. However, there are few considerations you should keep in mind to get the best return of your investment.
i) Use multiple resources
Do not rely on a single resource to determine the value of your property. Whether it’s a real estate agent or any other portal. Use multiple resources. For a reliable quotation and updated areawise price range, feel free to consult www.faizanbarai.com. We highly recommend you to reach a reasonable number of agents to get a fair idea of the market by their offered rates.
ii) Determine the worth of your property
You need to work a little cleverly in this stage. Reach two or three agents as a buyer and ask the rate of your property. After that, reach two or three agents as a seller for the same property. The actual market value of your property will lie somewhere between the rate quoted to you in both of these cases.
iii) Meet the other party directly
It is highly recommended to meet the other party face-to-face. Whether you’re a sell or a buyer, the direct meeting will make the process flawless. You can easily verify the legal and ownership status of the property perfectly through this practice.
In case, you’re a buyer, make sure that you verify the transfer letter or the allotment letter with the seller’s CNIC.
iv) Demand the token money in the initial stages
Once you’ve finalized the deal, as a buyer you need to pay token money. This token money is a sort of guarantee by a buyer that he will purchase this property and prevents the seller from selling his property to any other party. Therefore, token money basically binds both the parties to the deal. The amount of token many can vary from situation to situation. However, it’s usually a relatively little percentage of the property’s total worth. It usually lies between PKR 50,000 to PKR 100,000.
Your token receipt should contain all the necessary details of the property along with the litigation issues if there is any.
v) Reconfirm the allotment/transfer documents
You have to verify the transfer/allotment documents. In this regard, you need to visit the society’s or authority’s office. This will verify the current state of the property you’re interested in buying. However, in case of selling your property, you’ve to make sure that the transfer letter is issued to the buyer in his name.
vi) Repudiate cash transactions/payments
We highly recommend you to avoid payments in cash. It not only complicates the track of property transaction but also could lead to incurring legal problems.
Always prefer cheques and pay orders. Moreover, keep all these documented evidence in a secure place. This practice will help you tackle any future trouble.
This is today’s real estate investment guide for beginners. For any further information and genuine real estate investment advice. Feel free to book your consultation with www.faizanbarai.com.