Real Estate Investing
MODULE 4: Real Estate Strategies, Lesson 4
How to buy your First Property?
Adnan Ul Haq
Module 4:Real Estate Strategies
How to buy your First Property?
Adnan Ul Haq
Most people dream of owning their own property at some point in life. For those who are struggling to save up for this big purchase, there is always the option of buying with cash or on installment.
Follow the steps below and buy your first property easily.
The first thing that you need to do is to earn. There are many benefits of earning your own money. The first benefit is that when you want to apply for a mortgage, the bank will consider your regular source of income. If you have a regular income, then you will get a mortgage easily.
Similarly, if you don’t have a regular income, then the banks don’t give you a loan. A salaried person with a regular income, or a businessman with a regular income in his financial statement, will be given a loan easily. This is why you have to earn money.
Don’t Start with a Huge Investment
Don’t think about gaining huge amounts of profits in the very first time of investment. This is because if you invest a huge amount the first time, it can be risky.
So, for the first time, you should buy a cheaper property because this is your first experiment. You may commit errors but will do that at a low cost. You will learn through experiences only.
However, if you do this experiment at a very high cost, then you may get into trouble. Thus, you need to start with a low investment.
Buy a Property with a Cash Flow
The property whose net income, that is, the amount left after all the expenses, is higher than its purchased payment generates a positive cash flow. This means that you should buy a property with a rental income, and its rent should be more than its expenses. Then it is a property with a positive cash flow and you need to search for such a property.
Buy Underconstruction Properties
You might be wondering that nowadays properties are very expensive so how does one buy them? The answer is that you need to buy under-construction properties. There are many benefits of buying an under-construction property.
The first benefit is that you get the property at a low cost because it is still developing. The second benefit is that, once the development is completed, its prices will appreciate greatly. The third benefit is that the under-construction property is mostly available in installments, so you do not have to pay a huge amount.
Avail from Installment Plans
It is more feasible to take installment plans. You can take this installment plan from an under-construction project, a housing society, a bank, or through a vendor take back. Most people opt for this, especially if you are a salaried person, as you do not have to pay a huge amount at once; rather, it is deducted from your salary.
Also, businessmen do not invest all the money at once; they also prefer installment plans.
Take Help from the Banks
If you are unable to save the money that is required for investment, you can show your earned money to a bank and ask for a loan. You can tell the bank the amount of downpayment that you can pay and ask them to give you the rest of the money at a lower interest rate.
Build a Good Credit Score
The first thing that a bank asks from you while giving you a loan is your fixed income. The second thing is the credit score. They will inquire you about how well your credit score is. Credit score tells whether you pay your liabilities and dues within the due time or not.
So you should have a good credit score to get a bank loan, and for this, you should never delay paying any of your liability.
Settle Your Income Issues
You can be denied credit if you don't keep up with your bills. Make sure to pay them on time and through a bank so that way there is no risk for creditors. Also, make sure your salary comes in a bank on time, and you do not have any kind of salary issues.
Sell Out Your Gold
If you have any investment in the form of gold, then you should sell it and invest in property. If you bought a rental property by selling gold, then you can make double the gold through its rent.
Use your Provident Fund
If you are doing a job, then you must have a provident fund. Get that provident fund encashed. As per the laws, if you buy a property through the provident funds, then you can get a permanent withdrawal against the property.
Ask for Advance Salary
If you do a job at a place, then your employer may give you your salary in advance. They can also give you loans. Use these salaries or loans and invest in property.
Ask from Acquintances
If you do not have much money to buy a house or make any real estate investment, then go to a friend or a relative and ask them for money. You need to collect the downpayment or the amount to pay the first installments mentioned in the installment plan.
Limit Your Expenses to 60% of Your Salary
If you want to be a financially responsible individual, it is important that 60% of your salary goes towards expenses and 40 percent set aside as investment.
Find a Property with Rent-to-Buy Option
Some people offer you an opportunity where they ask you to pay rent for a certain period of time and then handover you the property after that time. This is mostly followed in foreign countries, but Pakistan still lacks this trend.
Do a Due Diligence of Your Property
You need to know the documents that are required to legally own a property or to buy or sell a property. If you buy a property through a bank, then the bank ensures the collection of all these documents itself and saves you the headache.
However, if you are buying it yourself, then you need to make the due diligence list and check the property against all those points. Or you can also take help from a lawyer or a legal advisor.
Arrange a Guarantor For Yourself
If you want to pay a minimum downpayment and want the rest of the payment financed by a bank, then you need to arrange a guarantor. This guarantor can be your wife, husband, father, etc., as the bank needs security from your side.
Work with a Good Employer
Most banks extend loans to good companies themselves. So, by being their employees, you get a better interest rate and get a loan easily. This will only happen if you pay all the installments in time and have a good credit score.
Always Keep Searching for the Property
Always keep looking for properties; never get tired of it. Don’t sit back because you don’t find a property within your budget; instead, keep looking for it, and you will definitely find a property that fits your requirements. Also, don't forget to efficiently use the technology for this purpose.
There are many things to consider before making your first investment. Avoid any kind of loss by doing a thorough research and searching for a reliable property agent, or you can take help from the internet as well.