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25
Mar
2016

Properties actually serves two type of needs. The first one is emotional need and the second one is the financial need. Or sometimes both needs work together.

 

Emotional need is the basic one that actually derives from a human need of shelter for himself and his family. The financial need is more concerned for making growth in wealth.

 

This write up is basically connected to “Financial Need” that means “Investment in Properties”.

 

First of all those that are investing in properties have to know it well that properties are one of the riskiest assets among other investments. This is why they are capable of producing high yields and equally demolishing your principal investments.

 

This is why management of properties and their risk management is the key feature to extract high yields from properties.

 

In order to understand the concept properly below are the step by step process that I feel better to make investment in properties:

 

WHO YOU ARE?

Before going any forward while making investment in properties it is necessary to understand your liberties and limitations. Your budget, your investment background, your capability to understand and bear the risk is of vital importance in the science of property investments.

 

WHAT IS YOUR OBJECTIVE?

Chalk out your objective while going to make investment in properties. You have to classify your investment prior making it in safety, growth, long term, short term etc. It is actually your objective that is the foundation of full investment body of yours in properties.

 

FINDING A QUALIFIED PROFESSIONAL BROKER

Having a qualified professional broker or property manager is the half way done in investment in properties. Actually they are the folks who knows the scenarios in the market and they are in better position to understand your objective and tailor property investment accordingly.

 

KNOWING YOUR MARKET

By yourself or with the help of your assigned broker you have to know the market in which you are making investment in. The size of the market, the dynamics of population, future property requirements in next 5, 10, 15… years will rationalize your assessment to any specific property. You have to know that “property is an investment in the context or story”. Try to get realistic stories from the market before making investments in properties.

 

KNOWING THE TARGETED PROPERTY

Once it is decided that the specific property is better, start the analysis of raw information. The first part of it is knowing the basics of that property. It includes the size, age, location, demand patterns, surrounding of that particular property. It helps a lot in tailoring your investment in comparison to your objectives. Studio apartments are fast moving than one bedroom apartments in areas where bachelors exist more than families. Sometimes they are attractive where rentals are high. Even they are attractive for small size future investors. This is just once example out of many to understand.  

 

ANALYSIS

It is not enough to know the physical or ground features of properties, you have to do a due financial analysis of your investment. You have to see the cost of your investment (e.g. interest of the bank loan you took to invest in), Return on Investment, Discounted Cash Flows over the period of holding an investment.

 

MANAGEMENT OF PROPERTY

The property well managed is the property that attracts tenants, future buyers or investors. It is better to make the property physically attractive to tenants. The property that derives good rental income due to its physical distinction carries distinct values and more buyers in the market than others.

 

CONTIGENCY PLANS

I always recommend not to invest more than 60% of investment budget in properties while making investment in short term or semi long term. Keep 40% in other highly liquid investment that can work as a contingency plan of holding properties in the time when it is hard to move them.

 

The properties sometimes go from the phase whereby the demand go down due to uncontrollable market factors but in any case the property markets bounces back in certain period of time. In order to have a suitable contingency plan you have to have resources that work as a mean to balance your financial stability and security of your investment in properties.

 

Even far before making investment in properties you have to chalk out exit and holding plans that become a vital part of your contingency plan that drives overall management of your properties when rough patches comes abruptly.

 

Conclusion

Investment in properties is not that small in subject that can easily be summed in one piece but I tried my best to post important aspects that I think are vital while making investment in properties for a common man.

 

In order to have specific property advisory (UAE & Global) contact saqib@utmconline.com or saqibomersaeed@bizomer.com

 

 


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Mr. Omer

Mr. Omer [1982 born] started  his professional career as a commercial / investment banker after achieving Gold Medal in Finance at master level from University of Karachi in 2006.

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