5 ways to make money in real estate
People have become millionaires in a very short span because of property trading as well as development but foremost it’s the land value that has appreciated. Value addition to the raw commodity has given good returns as well but it’s the actual price of land which seems to land higher profits. The opportunity to make money in real estate is open for everyone and does not require a special set of skills.
Even the billionaire American President Mr. Donald Trump is a real estate tycoon. In Pakistan particularly we look at Mr. Malik Riaz in the same manner. There are ways to make money in real estate.
“Be greedy when others are afraid be afraid when others are greedy”.
In this article we will focus on short term trades and how to go about it.
There are 5 basic ways to make money in realty explained below. Some points might only relate to the Pakistan realty market otherwise they are applicable around the Globe.
A general rule of thumb is to be on the lookout for a plot which is cheaper than the market. This could be due to various reasons e.g. a person needs to make a further payment and is stuck, a person might be moving therefore, selling his/her assets, etc. In the current market situation in Pakistan there are many opportunities especially pertinent to DHA Lahore.
When going for such buying at a cheaper rate be aware to include your transfer expenses as well as taxes in the buying price to make sure that the plot remains at a lower price in the current market even after having it transferred to your name. Such people hardly give you grace period on Biyana as they are in immediate need of money. Do not think twice if such an opportunity knocks to make money quick.
When a renowned developer of society launches anew project at a reasonable or good location. When DHA announces a new Phase or a new development there is always the element of abnormal appreciation initially. It is advisable to grasp such an opportunity when it makes itself available. In today’s case it would be Phase 10 files when they are available in the market. Be sure to buy when a bulk becomes available, not when there are only a limited number of files and more are expected to come.
Either buy in the beginning when limited number of plots or files are launched in an area, or buy when a bulk is available in the market of a particular file or plot in case thereare a handful initially but you expect more to come. People who had initially bought DHA Gujranwala, DHA Multan or Bahawalpur have earned reasonable profits in the initial jump. Do not fall for greed sell when you see a reasonable profit because in the longer run if you calculate time value of money you might actually lose out instead of gaining. In the same connotation when Bahria announces a new project there is a profit on installment plans which is called‘Own’ after which a natural cycle is that the prices dip to less than even the booking price in 70% of the Bahria Town cases. In DHA however, the case is a little different there are good hefty gains after which the price falls but to a reasonable extent and sometimes it sticks to the high end price for a longer period of time.
Another element which is very vital is in terms of trading. For this purpose you need to have a keen eye on the market pulse. This is when you need a good real estate consultant who is always present in market and knows about the current trends of the market. This accounts for the fastest buck in the real estate market.
The realtor or yourself buys a commodity whether a plot or file if the particular commodity is upward trending. In some cases the overall market is going upwards in which case you have the opportunity to play anywhere within your budget, whatever agreement to sell that you enter you know you would come out at the top. It is advisable to have a good consultant in this case who will tell you when and what to buy and when to sell and what to sell out of your portfolio. In a downward trending market this is also applicable as there has been no instance in history where everything falls, there is always that one commodity or society which seems to go up. It is not necessarily a plot in a society or file, it could be open land as well. For example in July, 2016 property market has seen a downtrend in Pakistan but then there is Gwadar which is going up, there are pieces of land which are going up, DHA 9 Town file has gone up.
An example could be that Plot A in a society can be valued at a price of 20 million it reached a high of 25 million (this is the time to sell) as the market was going up and due to macro and micro economic factors or change of policy has dipped to 16 million (this is the time to buy). A real time example of this would be the correction that has taken place in files, after the policy change of government the files dipped exponentially by 6-8 million this was the time to buy and then became stable after gaining 4 million.
Although the market is down as of November 2016 the files gained 4 million and are believed to be still below the genuine assessment of the property, but buying at a low gives you a good exit and is still a good buy for the long run. We are discussing a short term trade therefore, the prior is applicable. The same would happen in Phase 8 U, V, S, and T block as well. Assessment is either done by a professional realtor or you if you are in the business.
This might take 6-8 months to break even after which every dime would be your profit on the project. For this you need to spend heavily on marketing, do not be a miser when it comes to marketing, it is only marketing which will sell the project. For this you need investment for land, and for the initial infrastructure along with marketing expenses. You need to give heavy commissions to the realtors, real estate agents, incentivize them heavily as it is the real estate agents which will sell your property and make it profitable.
Buy a piece of land which is easily accessible, build the initial infrastructure which will include the society gate, main boulevard of the society and a few grey structures, then bring agents into your panel one main agent who will be incentivized at a good percentage and will further a major chunk to the market, you can hire a marketing company or if the agent is capable enough he can do it for you. A society map is essential have it done by a professional with 60% residential and 20% commercial commodity with 10% dedicated to common areas and parks. This would be done out of the 70% of the land which would be left after infrastructure layout.
These are some pointers to make money in the real estate market. A professional real estate agent would help you make wise short term decisions. It’s always advisable to always hire the services of a professional no matter how big your portfolio is. Even a doctor seeks a professional opinion when he’s sick. It’s a small cost to pay for the larger outcome.
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Captain Shahnawaz Bhatti (Retd) is the founder and CEO of Imlaak which is based in DHA Lahore. He has represented a large number of investors in a wide array of real estate transactions. With more then 8 years experience in commercial real estate, marketing and real estate project management, he has a proven track record of guiding national and multi-national clients with their real estate portfolios and asset management. He is also an active real estate blogger and offers free advice through his articles. Imlaak handles real estate transactions valued at well over 9000 million every year. Our specific area of expertise includes strategic planning , transaction management, asset trading, partnerships & venture capitalist with experienced business owners, entrepreneurs, inventors & some proven-concept start-ups. In a very short time, Imlaak has introduced a new vision of professionalism, transparency and hard work in the real estate industry. ‘There is no better time to invest in real estate than today’ Captain S. Bhatti