Real Estate Investing
MODULE 6: Making Money in Real Estate, Lesson 3
Should you invest in files?
Adnan Ul Haq
Module 6:Making Money in Real Estate
Should you invest in files?
Adnan Ul Haq
The value of money depreciates in banks over time, so you should invest it elsewhere. For example - there are properties with files! They can be a smart investment if you want to make sure your money lasts for years and decades into the future.
If you come across property files being sold around, then it is time to loosen up your pockets and invest that money into those files. It may be a good idea to invest your money wisely by purchasing a property file with all its legal documentation filed upfront and ready to go!
What is a File?
Files are promises from a society that they will hand over the possession of a piece of land on a given date. Realtors have been selling property files in the market for decades, but smart investors still get excited to buy a file any time they get a chance too!
The files are made as a result of the map approval. Each society has different types. For example, in DHA, there is an affidavit and allocation option, which you can purchase to document your ownership over land that will be acquired by DAERA or gifted from individuals through agreements called "affidavits."
What is Allocation?
There are two types of files that can be found in DHA. These include allocation and property deals. Both have different purposes but share some features such as being transferable between owners or having limited life spans before they expire (1 year).
The price difference between these could largely depend on how big of an investment you're looking to make.
High-Risk Level Associated With Files
The file is an undeveloped plot of land that has not yet been built on. This means there are higher risks associated with this kind of investment as opposed to developed ones. However, on the other hand, the property files are sold at a lower price due to its lack of development so the buyer eventually makes more money through it later down the line.
Investors should know about the risks associated with files before they invest. It is not always clear whether development has occurred, which means that there could be hidden construction projects or any scam - all without any warning signs!
Commitment Risk and Hidden Surcharge
The high commitment risk and hidden surcharges make it difficult to invest in these types of files. If you're unsure about the promises made by the developers then don't take the chance!
Investing is all about knowing how much things cost beforehand, so there are no surprises later on. However, this isn’t always possible when dealing and investing in developing countries like Pakistan, where people often get scammed by developers.
These developers take advantage because people are too trusting. You should be aware of these practices while investing.
Beware of Fraud
The first way to prevent fraud in real estate is by investing only with approved societies. You should never invest through non-approved or unlicensed societies and developers, as they can disappear with your money!
For example, if you are from Islamabad, there's the CDC ( Cycling Development Center) society which has been approved for investments. Always consider such legally approved societies when making investments.
Do Due Diligence
You should always do due diligence in real estate transactions. What are the things that you need to check when investigating a property?
You must verify ownership of land or file, whether it has been acquired legally, and if so, then by whom. Look into any title documents such as deeds or patents for proof before committing yourself financially to something. Don’t do so without completely authenticating the property and its fundamentals!
The File is also an Appreciating Asset!
The file's price would fluctuate depending on important announcements such as development news, balloting updates, and possession dates. For instance, it will be low when there is an update about the society’s key date or any other legal proceeding that affects members' rights in general.
On the other hand, the prices appreciate during voting periods. This is because those events often have significant impacts on people living within specific communities.
Similarly, when the news about development comes, prices will increase. If previously a property file was worth PKR 50 lacs, it will reach near PKR 1 crore after a few days of the development news. So you must sell the file when the prices are high to earn maximum profit.
The bottom line is - Do your research, and then invest in a file!
If society has a proper stamp of approval on it, then you can rest assured knowing that your investment is safe. But if the documents have no reliable government stamp on them, then the society may be shady. Be careful because this could mean something fishy going down!
You can gain huge amounts of profits through property files. They're available at low rates, but there's always risk involved!