How ‘Home buying’ Differs From ‘Investing’?

The Indian economy is showing an upward trend with a pro-active government at the center. Moreover, expectations have risen with demonetization which makes this the right time to buy a property. Buying property nowadays is quite different from what it used to be. Before the economic slowdown, one could be sure that the property could fetch a good dividend in a short span of time. Real estate was looked upon as a lucrative investment opportunity. But today, homebuyers are in doubt as to what they should do; wait for the prices to fall or not. Pre-requisites differ when you are investing in real estate than when you are buying a home forresidential purpose.

How ‘Home buying’ Differs From ‘Investing’?

How ‘Home buying’ Differs From ‘Investing’?

So, are you an investor or an end user?

The difference between the two is that the first is looking for returns on investment and he is backed with a certain amount of a risk appetite. An investor looking for returns is ready to gamble on his assessment of the current and future market conditions and is also invested in other instruments such as stocks and bonds.

A home buyer on the other hand is interested in buying a property for self-use (to reside). Price is the vital factor and also there are other considerations. A home buyer cannot view the property with the dispassionate eyes of an investor who looks at them purely as items that are stocks in trade.

Market timing also plays a pivotal rule. An investor has to make his entry and exit at the appropriate times. He is well aware of the right time to take the gamble; he has to be street savvy and alert. Whereas on the other hand the entry of a home buyer depends on the market pricing and the home buyer does not have the motivation of an exit point. If a home meets a buyer’s criteria in terms of location, facilities offered and the neighborhood, it is usually inhabited for several years or decades.

It makes sense for both investors and buyers to know these fundamentals, but again both should not necessarily let their choices be guided by them.

Residential real estate markets behave differently in different cities. Investment strategies also vary for different locations. In certain micro-markets, prices will not fall below a certain mark since there is demand but short supply because there is no new supply. Investors need to study the local markets, identify the corridors which promise the best capital income and rental returns before entering the market.

Home buyers on the other hand have a different goal. For them the house is a place for their family to live, and this has nothing to do with investment potentials.

What should home buyers do? Strategy for home buyers is to set a budget and get a preapproved loan on this budget, short list the locations and identify places which fall within the budgets. If you want to wait then the wait-and-watch game commences although if you decide to buy then the home buying ends. The process of buying a new home is already complicated, why get yourself more entangled.

First-time homebuyers and investors should hire an experienced real estate agent or consult a full-fledged real estate consultancy to get clearer views on the right kind of property- both for living and for earning fruitful returns.

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