Important Questions To Ask Before Investing In Real Estate Property

Investing in real estate is a broad spectrum that can often be confusing and overwhelming for first-timers. The chances of a regrettable decision are high because beginners usually jump straight into real estate platforms in India without getting the proper knowledge. It is impossible to know everything in a small amount of time, real estate is a growing business and changes keep happening as we speak. But when you ask the right questions, understanding becomes much easier. Speaking to the right people will give you the best knowledge on the topic and it’s not bad to be up to date with the latest trends. With all of this, you can avoid making major mistakes that could cost you a lot. There are certain questions that come up often compared to the others but have various answers to them. To make your investment choices better, here are 5 questions that will help you speed up your real estate process. 

 What is the Investment structure?

There are numerous ways to arrange a private real estate investment, and each offers its own set of benefits and dangers, whether it's through individual syndication, a specialized fund, a diversified fund, or another sort of specialty structure. In order to buy, sell, rent properties in India, you have to go through a complicated structure.  If you invest in a single property, for example, individual syndication might yield above-average profits if the venture is successful. For example, if you partner with a developer to build a multifamily complex from the ground up and the demand for the apartments exceeds expectations. On the other hand, if market circumstances, cost overruns, or financing do not go as planned, you risk losing your whole investment. 

When you invest in a specialized fund model, you have the benefit of diversifying your risk by investing in a portfolio of real estate holdings, rather than focusing on a single asset type in a single location. A diversified fund can offer exposure to a variety of asset types, as well as different regions and managers. Private real estate investment funds can help you add real estate exposure to your portfolio while spreading risk and outsourcing risk management to a real estate investment manager with established and time-proven risk management skills.

 Do you understand the Housing Market well?

Location plays a huge role in determining a successful investment. As a seller, you can list your properties online with a great location. The location of your investment property is likely to be the single most critical factor influencing its success. It will have an impact on your rental expenditures, rental revenue, cash flow, cap rate, appreciation rate, and a variety of other elements that define the profitability of an investment property. It's probable that you've already decided on a place – whether it's your local home market or out-of-state real estate investment. So it is extremely crucial to understand whether the house is good enough for an investment. 

What are the correct asset and investment strategies?

With so many investment options available in the real estate market where people can sell properties online too, it's vital to know which ones are right for you. There are several real estate investment techniques available, both active and passive. The buy-and-hold approach, for example, fix-and-flip, real estate wholesaling, REITs, crowdfunding, commercial real estate investing, mutual funds, land, and so on. With so many possibilities, it might be difficult for a newcomer to decide which path to choose. This is why you should educate yourself on these techniques to choose which one best suits your real estate investing objectives.

How Long Would My Investment Be Tied Up?

Liquidity concerns are present in private real estate partnerships, as they are in other forms of alternative investments: the sponsor cannot quickly liquidate and repay cash to investors. Because real estate is inherently illiquid (you can't simply sell an apartment building or a warehouse as you can a stock), you must account for this risk when evaluating the prospective profits of a real estate investment. The holding term for MLG Capital's private funds is generally 5-8 years, which means that properties are bought, redeveloped/stabilized, and sold within that time frame. The real estate investment will be able to target predicted IRRs that are generally greater than liquid alternatives throughout this holding term. This is an essential issue to consider if your investing goals necessitate quick access to cash from your portfolio.

What Are the Tax Implications of My Investment?

Because tax conditions differ from one investor to the next, it's advisable to consult a specialist, such as a CPA or tax attorney, about tax preparation. While real estate has several tax advantages over other forms of real estate investments, it is critical to grasp the subtleties of these rules and speak with your tax expert about them. Although the business with which you intend to invest may have in-house tax experts, it is important to consult your own tax counsel before making a real estate transaction. 

You must be properly prepared and educated before entering the real estate market and real estate platforms for brokers and sellers. You should now have a better grasp of what to expect in your real estate investment adventure after reading the following real estate questions frequently posed by novice investors. Never be afraid to ask questions if you are confused about anything. You will be able to improve and go ahead of your competitors by asking all of your real estate inquiries.

Credits: Manavi Sarang