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Traditionally real estate has always been touted as the most prudent investment for people. We do believe that there are only advantages in investing in real estate and temporary cash flow issue. However, there are many pitfalls, and some may knock off your capital as well.

Investing just in Prime location Properties High-yield real estate means investing in a property in a prime area. Again, there is nothing wrong with investing in a high-yield real estate project. If you are planning to rent out the house, then you are assuming to get high returns and higher ROI when selling. You may be planning to sell the land or opt for a joint venture with a builder.

Investing in real estate in a prime area is a good move only if you happen to balance your portfolio in the right manner. The high-yield real estate also comes with significant risks. When you solely focus on rental yields, you will find that you are blind to factors that affect your other cash flow needs and goals.

A house in Mumbai’s prime area will demand that you invest more money in renovating and safeguarding the property. In cases such as this, the supposed ‘profit’ that you would get from one high-yield real estate may get redeployed.

That’s why you need to balance between risk and reward investment especially when it comes to real estate.

Investing in land

Some people believe that investing in land is the best possible financial investment ever. They are right, but there are many factors that one needs to consider here. Before investing in property, one needs to ask these questions

• Will the price of the land increase?


• Will the area develop?


• Any Legal Issues?

If the land is in a prime location, then obviously it is going to be a costly investment. Investing in the area alone will not be enough you will need to ensure that the property is against encroachers and those who would seek to grab.

No matter where you buy the land, it is imperative that it be protected from encroachers at least with a perimeter fence that would proclaim your area well and clear. Otherwise, you will be spending lakhs of rupees trying to evict encroachers with the help of court, lawyers and the police.

One of the many pitfalls of investing in land is to sink lakhs of rupees in it with no visible change in the property rates. Those who can afford to wait until the land rates increase substantially and have potential to safeguard the property will win this game.

However, if you are in this for a short-term gain then, the chances of losing money is substantial.

Underestimating Expenses

The common mistake in real estate investing is underestimating the cost of owning that property. Whether you are buying a house or a flat you will need to account for delays, unexpected expenses caused by unpredictable factors. Even the most established and reliable builders in the market are known to delay their project for a variety of reasons. The only way that you circumvent this problem is to prepare yourself financially for such eventuality.

Investing just because the property looks good

Many get decoyed by the dressed up property. We see a house nicely furnished with lovely colours, furniture and stuff. It’s in a great location, and what more it comes within our budget, and we believe that we have found the perfect home. Not until the first instalment you would notice anything amiss. It’s when you start using the property you may come across the water seeping into the ceiling, the paint peeling and the myriad other structural problems that one will encounter in a house.

Apart from this many invest without investigating the facts and that leads to a lockdown of funds. Investing in real estate is, by all means, prudent but only if you are wise enough to assess it with a paid advisory who can give you unbiased advice based on your overall financial condition and prospects.