Many of you must have had thoughts of purchasing properties, real estates, flats, lands etc. etc. for both personal as well as investment purposes. And you must have wondered whether the hard earned money that you are spending on it worth it or not?? let the money be your hard earned or inheritance from dad or even let it be prize money or cash rewards!!!

You would want the money to be with you and not just blow up the whole lot. If at all you wish to blow it you can go partying or buy a BMW or something.

Well lets not go off topic now. Here I want to tell you how you can actually value a property that you wish to buy and how much you can quote for it. Actually it depends on whether the property you are buying is commercial or something personal or for investment like i mentioned before.

So here is how you should proceed.

First check the area personally and make enquires at the neighbourhood. I know you may feel awkward like a salesman but you must do that. If it is a flat or like an apartments you have a choice. Visit the Apartment’s Society’s Secretary or President who will give you a fair idea about the history of the apartment and the range of rent in that apartment and what type of a seller the owner of the flat is like and also if the flat you are going to buy has a tenant in it know about the tenant and whether he is regular in payment of rent and all.

Then you have a fair idea what the locality is like and how much you can quote for the property. For anything you MUST do some homework, without which you wont be getting anywhere but loss and failures.

Secondly when you give your quote for the property you must calculate depending on the rent that the property gives. For example if you are looking at an apartment or any commercial property and the rent realised there is say around  `6000 then multiply the rent by 3 (multiply by 2 in case of commercial) and convert it into lakhs. simple

` 6000 x 3 = 18000

therefore you can quote 18 lakhs for the property

in case of commercial its like this.

` 6000 x 2 = 12000

therefore you can quote 12 lakhs

anything below the formulated amount is good but above it may be taken into consideration still bargain your hardest

Now to finance part you must be prepared (in case you are investing and not going there personally) be prepared to make yourself affordable enough to be without rent from that property for 1 year i.e. be prepared and financially stable enough to be able to resist inflation and anything financially for up to 1 year.

And don’t take loan i.e. avoid loan as much as possible but if at all you must take take about max of 50% of the value that you are prepared to buy for and not above that if you take above that you well might fall into a debt trap!! so beware!!

remember you might well get good discounts if you have cash ready for spot payments. that will help you bargain even more. so be careful about your finance.

Then before you buy make sure the buyer has all the documents and dues paid (eg. electricity bill, maintenance bill, water bill, Property Tax etc.). And whether the property that you are purchasing is there in the municipality and town planning’s list i.e. whether they have details of your property if not better avoid it. If you purchased it by mistake you can rectify by paying some fee and getting it registered. But as far as possible avoid it.

To check whether the person you are talking to is the owner of the property just go to your nearest Registration Office and ask for EC (Encumbrance Certificate) they will charge a small fee for it but its worth it.

Avoid brokers and middlemen as much as possible.

And work out the rate of return. i.e.

if you are getting say `10000 per month for say an investment of 50 lakhs, You will get 10000 x 12 = 120000 (1.20 lakh) i.e. you are getting 2.4% per annum. where as if you invest in postal or bank you can very well get at least 5%. So think about the returns when you are giving for rent immediately or later.

Prefer second hand flats if you are giving it for rent. you don’t want to ruin your new house by giving it to a third person don’t you??

If I had left out any point, Please comment and let me know so that We can help people advance in their approach and educate them

Thank You

Update :  I recently came to know that

– commercial property must be valued at x2 of the rent and convert into lakhs. i.e. like in non commercial property you multiply the rent by 3 and simply convert into lakhs. e.g. if a commercial property is giving a rent of Rs. 1000 then you multiply 1000 x 2 = 2000 simply convert it into lakhs.. Rs. 2,00,000 is your final value for money quotation. anything above that priceline will give diminishing returns.

 

– when purchasing commercial property, check for road widening of that particular road at the town planning board of  your city or town. it will help you to a great extent to decide whether you must buy the property or not..

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