I am in process of exploring different investment options in real estate. I have bought a house in past but not traded plots. Is it possible to identify key points to look out for when evaluating a plot purely for investment purpose? I know all plots are different but are there any investment rules or minimum standards that shud be kept in mind to select the right kind of plot for investment.
@Naveed. Consideration for buying a plot is naturally very different from buying a house but golden rule for property investment remains Location, location and location.
However having said that, how you define a good location is open for debate. I can bet that even if you ask all gurus on this site they will not be able to agree on any single definition.
Some rules i think that may help you.
1= Go for smaller sizes not more than 10 marla (gains quickly and sells off quickly)
2= Location and Access go side by side. It is just like walking on one leg so both are important. Then consider development standards and other matters.
3= You are a small investor so best is to go with the trend and never against the trend. When prices are increasing invest rather than wait for the reversal point.
4= Always invest in the size which is in abundance in a given society.
5= Better buy leveled, height view, corner, south face (sun face) plots.
6= Better the plot higher the return it gives i.e. A simple rule is jitna kisi plot se kam keere nikal sako samjho utna hi acha hai.
7= Don't go for higher tags. You goal is max ROI whether you get it by investing 1 million or 10 million.
8= analyze the particular community living in the area. Rich ppl prefer big plots and middle class go for smaller size.
9= compare prices with neighboring societies to get a reflection of market rates. For example if there is a very posh and expensive developed society near the society you intend to invest then prices have very good potential for good returns.
10= It is better to go for what is there in the present (jo samne nazar aaraha hai). Don't bet on the future ke agar yahan se ye road guzar jae ya ye ho jae. Because agar na hua then you will be in loss.
11= Have patience. Do not expect gains overnight.
Best reply by Arshad bhai.
Regards
@ Arshad sb…SIr thumbs up…A very comprehensive yet elucidative answer.
Thank you Nadeem and Saadi bhai for the kind words
Agreed, excellent reply by Arshad sb but I do have an observation regarding point 4. When a particular size is in abundance, it has many sellers as well and therefore perhaps a lower market gain potential. If a particular plot size is in short supply, its gain potential is much higher. That’s just my observation.
Arshad sb, very detailed and good response. Appreciated.
Regards
Arshad bahi.
Really appreciate your effort.
Regards
Dear Arshad Sb,
i copied and saved all of your comprehensive points to get direction for future deals.
Regards
Awesome explanation Arshad Sb,
Please guide me on below, Purpose : Plot for investment, 3-4 Years.
1- Recommended society (Range 3-4 Million).
2- reviews about Gulberg Residencia, Naval Anchorage, Bahria Enc.
3- How feasible is B-17 vs F-17 for investment purpose.
Thanks.
Thank you dear members for your feedback specially Arshad sb for such a detailed and excellent reply. So from the replies one thing looks clear that we should not be investing in any new project no matter how good because their development of plots is not complete and we should buy only develop plots. Is that correct?
Some well known projects offer files and bookings of plots on installments. Can these be explored for investment purpose or shud it be only develop plots?
Naveed bhai,
investment in files or at the start of any new project is risky, however, the margin for ROI is generally huge. The ROI gets lower and lower, when the project moves towards maturity (the different stages could be release of map, award of contract for development, start of development on ground, carpeting of roads, installation of electricity etc, possession, start of construction of houses and so on). If you want to play safe, then go for plots on ground, in this case the profit will be slow and steady with passage of time. However, in files the returns could be over night.
So, it basically depends upon your investment approach and risk appetite.
I hope it helps.
Regards
Thank you Mr Khan for the reply. Your points make good logic.
Welcome Naveed.
@Naveed. You have got some top notch advice from Arshad and Mr Khan. I would just like to add that as an investor and specially a new or part-time investor, it is always a good idea to respect the market sentiment and don't try to swim against the tide. Yes money can be made by being a contrarian, but for that you need to be Very active in the market on a full-time basis, like an estate agent.
Consider it like booking a new car. If you were to book a new Corolla for your own use which color would you choose? Perhaps Strong Blue or may be Gun Metallic? Or whichever color you like. Now on the other hand, if you book a car as an investor, like the people who book cars to sell on premium or "own", which color would you choose now? You would only go for white, black or silver, even if you hate these colors! Why? Because these are the colors most in demand in market.
Same goes for plot investment. If you buy a plot for living, you will select it based on your personal taste and preferences. However when you buy a plot for investment, go with the market sentiment. You might not like the particular plot nor find the project/ scheme worth living in for your own self. That's where you have to let the investor mind dominate. If its "in" in the market, it usually makes for a good investment, done at the right time.
Thank you Mr Raza. That is a very good example you have given and your point is so true. Whenever I go to see any plot for investment the first thought which come to my mind is will I like to build my house here! You have rightly pointed out that is not the right approach.
Thumps up Raza Sahab
Well said
@Abdul Qayyum. Thanks!
@Naveed. Its very natural for a novice investor to start evaluating every plot as one where he would make a house. That is completely wrong. Everyone has their own preferences about where they would like to live. Our liking will not make any plot highly saleable, it is the market sentiment which counts. That is why you see so many projects where people are stuck with their investments with little returns. They bought based on their personal liking, thinking that if it looks good to me, others will like it too. Things hardly ever work out that way.
The rule here is quite simple. For investment, you buy what the market likes, not what you like. For living, you do it in reverse order.