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Know your property

Updated on December 25, 2015

Property Investment

Investment in property has become increasingly popular in last 2-3 decades and is the best option for every second person with some savings. It is considered as more profitable and safe investment in comparison to stock market and bonds. This is the reason that market has emerged with endless numbers of new builders and property brokers offering plenty of excellent options for investment. It becomes rather more difficult to choose among the endless options as they create confusion and doubt. Real estate investment is not a game of few thousands rather involve huge amount due to which it becomes far more important to opt for the property even more cautiously.

Once the person is confirmed with the decision of investment in property, first question arises of the kind of property to be invested in. This is very significant issue that needs deep discussion and analyses because the performance of the property will in turn affect your investment. No one can assume the kind of returns from a particular property beforehand as each property has its own value according to the location, construction quality, footfall within the property and nearby localities. One property may come up with 100% profit within a span of 1 or 2 years whereas the other property of same kind may not perform even 10% hike within the same time frame. It is totally a risk factor that is worth taking but with proper guidance and analysis and knowledge.

Income generating and non income generating property

There are number ways to classify the kind of property investment and classification into Income-Generating and Non Income Generating is one of them. Income generating properties are those which start offering you some returns immediately after purchasing the property depending upon its value and requirement within that location. It may be an Office space, Retail shop, Industrial and leased residential house. The main objective behind purchasing such properties is to generate some returns so that to cover the extra expenses like taxes, mortgage, maintenance etc. Side by side you may earn good capital returns from the property.

Non Income generating properties are purchased mainly for long term capital appreciation only. Such kind of properties includes vacation houses, Farm house, vacant land etc. These types of properties are considered as good options for long term investment because they are much cheaper as compared to Income generating properties. Once the nearby areas are rehabilitated, you will start getting good buyers and builders to purchase your property with good returns. Important point to note here is that the owner is regularly maintaining the property and paying taxes without any regular income just to gain huge returns after a long time.

Residential and commercial investment

Next classification can be done in terms of residential and commercial properties. Residential properties include Apartment, Independent House, Independent floor, Residential Plot etc. Each individual has its own personal choice in terms of the nature of the property as few may like apartment in high rise building due to security and privacy and others may like House or independent floor due to the open space available on ground and terrace. Any residential property available with plot will always be costlier than an apartment or floor which further may depend on its location, features, construction quality and builder. Residential properties are easier to get finance from any bank or financial institution but the percentage of loan available vary for built up property and vacant land. An apartment or house can get up to 80% loan of the property value whereas a vacant plot gets only 50 to 60% which further depends on customer eligibility. Apart from this a built up property starts offering rental value immediately after the purchase depending upon its requirement within that area.

Commercial properties are purchased purely for investment purpose as they offer high rentals and good returns as compared to residential properties if purchased in high footfall locality. They include retail shops, office spaces, commercial buildings etc. Commercials may involve heavy investments but also offer huge capital appreciation and rental value in comparison to residential. But this is note here that it is quite difficult to arrange for a renter once you lost the previous one whereas residential properties does not face this problem as whatever may be the situation, people always need a place to live. Investment in commercial property needs proper survey and analysis of the kind of locality and specially the footfall in case of retail shops, restaurant and commercial buildings.

Single used and mixed use property

Single use properties are used only for single purpose like a residential property can be purchased only for residence and commercial property for commercialization. Such properties have limited segment of buyers or renters like a shop owner will approach only a commercial property and a home buyer will go to a residential property owner. But they are easy to maintain and can be easily financed by any bank.

Mixed use property is a combination of residential and commercial property which can easily be seen in urban areas. There are number of properties wherein Ground floors are reserved for retail shops and upper floors are used for residential purpose. Likewise there are malls and commercial building with retails shops on ground floor and office spaces on upper floors. Such type of properties offers multiple sources of income from residential as well as commercial properties. They are easy to rent out also as tenants get convenient stores within their building and shop tenants get customers for their products. These kinds of properties are difficult to construct as well as maintain and also doesn’t get easier finance due to the risk involve of two different business set ups.

The purpose of so much detailed explanation of the type of property is that one should have the knowledge of the kind of investment he is planning for. Once the person is aware of all the basics of his property, it becomes easier to choose the investment. Blind go ahead to any decision always comes out with negative result. Each person has its own priority according to the budget, personal choice and features of the property. Hence it becomes quite important to classify the kind of property and understand all its positives and negatives.

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