Terms to know before investing in real estate
Investing in real estate deals with a plethora of factors. If you are thinking of planning your first real estate investment or diversifying your investments into something new, then you should be aware of certain common acronyms and jargon.
As a beginner, it isn’t very practical to learn about all the terms at one go, but you can get familiar with a few common ones gradually. Let’s discuss some common real estate terms, that every real estate marketer or investor should know:
REAL ESTATE TERMS TO KNOW BEFORE INVESTMENT
- Return on Investment (ROI):
Return on Investment (ROI) is a measure of the profit which you get on investment, whether it is a real estate investment or not. ROI is calculated by dividing the net profit by the total capital cost of the investment. The higher the ROI, the better the profit will be earned. The ROI calculation helps you to decide whether an investment is profitable or not.
ROI = Net Income / Cost of Investment
- Basic Sale Price (BSP) or Market Value (MV):
Basic Selling Price (BSP) or Market Value (MV) refers to the base rate per sq ft at which the property is listed for sale by the seller. It does not include any additional charges like Goods and Services Tax (GST), amenity charges, preferential location charges, and other maintenance fees. However, these additional charges can come up to 20% of the basic selling price.
- Cash Flow:
Cash flow refers to the net amount of cash that you earn every month from a property after deducting all the operating costs. It is the net difference between the money coming and going out from your asset. When your income is more than your expenses, then your investment seems to be profitable and maintains a positive cash flow. But if your expenses are more than your income, it is termed as a negative cash flow. Ideally, an investor should always choose a rental property that helps in maintaining a positive cash flow.
Appreciation in the real estate investment market refers to an increase in the value of property over a certain period of time. Factors like highly favourable location, high property demand, limited supply, inflation, etc can cause the value appreciation of properties. For example, in localities where new and upcoming commercial and infrastructural developments are in progress, we can note the property prices are likely to appreciate rapidly. Apart from that, properties with a special ‘view’ such as nature, lake or sea will have much more demand among buyers and thus will witness a higher appreciation rate than others.
- Turnkey Property:
A turnkey property is a home or apartment that is nearing completion or is very close to getting ready for moving. Turnkey properties generally have a high demand among the investors as they can buy and start renting it out without waiting for long. As these properties are mostly newly built, the owners need not have to do any kind of renovation or repair work. Another benefit of turnkey properties is that buyers can directly see the home and assess the quality and other related features before purchasing it.
- Freehold property:
A freehold property refers to one where the owner has complete and unrestricted ownership of the land and building. In this case, the owner has no restrictions to transfer the property further and the property can also be inherited. Freehold properties are more stable than leasehold properties and will fetch more value in future. Freehold land is generally bought through an auction or a lottery. When you buy a freehold property, you also own the land it was built on, along with the house itself. The sale of a freehold property is easier as no authorisation from the state is required.
- Credit Score:
A credit score is a measure of a person’s creditworthiness or eligibility to repay a loan. The credit score, also known as the CIBIL score, is a three-digit number, which ranges from 300 to 900. A good CIBIL credit score is considered to be around 750 or higher. Banks and other lenders evaluate an individual’s credit score really well before issuing a home loan. It is calculated based on the person’s past credit history. The better the credit score, the higher are the chances of getting a loan approved. A higher credit score can also provide benefits such as lower interest rates, flexible repayment terms, a quick approval process, etc.
Real estate investment is one of the most profitable kinds of investment in India. Property is a lifetime asset that increases in value. If only you are well aware of the market and its prevailing terms, you can make the right investment that promises great profit returns.
FAQ’s about “What are some good real estate strategies to gain more listings?”
For a real estate agent, gaining property listings is equally important to gaining buyers. Here are some of the strategies that real estate agencies can use to gain healthy property listings:
- Call up – Pick up your phone and call up everyone in your social personal contact. Make at least 10 phone calls every day.
- Social media – Create your own social media page and share relevant information to attract and educate sellers as well as gain popularity for your agency.
- Website – Create a website and manage it well. Spend generously in creating content for the property description, gather testimonials to showcase and get SEO for your pages done.
- Charges – Keep a lower charge on the listing. To balance out, you can keep a commission on sale a bit higher.
- Socialize – Always keep social contact with your past and present clients. Wish them on special occasions, send them newsletters.