Investing in real estate is not a simple, one-step process. Hence, it is understandably a decision that is rife with a lot of misinformation. Considering that there have been myriad developments in the real estate industry over the past few decades, advice from the previous generation also tends to be slightly outdated or irrelevant.
If being a home owner is your long-term dream, here are some associated real estate myths that you may want to shake off:
- Real estate value will increase/fall: This myth clearly reveals the lack of understanding of how real estate prices work. Real estate prices are known to either increase or stay stagnant. Price corrections never lead to fall in real estate prices. On the contrary, being extremely confident that value will increase is also unwise. There are multiple instances of real estate prices being stagnant in certain areas of metropolitan cities.
- Bigger down payments are better: Individuals who wish to avail home loans often believe that if they arrange for a large down payment, their EMIs will be considerably smaller. The truth, however, is that if the down payment is lower, the interest rates fall. Also, in the quest to save enough for a large down payment, one might just miss out on great properties.
- Availing discounts immediately: Some individuals believe that waiting for builders to offer discounts is the best way to go about purchasing homes. The larger the discount, the better the deal is the belief. The reality is that the discount could be offered to overcome some other seemingly unfavourable aspect. So ensure that you thoroughly look at the discount being offered and the possible reasons behind the same.
- Value for money from suburban homes: For city dwellers, this one is a rather popular belief. What is critical is to add costs of relocating to the suburbs, transport and so on into the process in order to get a bigger picture of what the purchase and move could mean to you financially.
- Local builders are better than big brands: The belief that local resources are cost effective compared to big brands is a common misconception whether it relates to commodities or real estate. In this case, comparison of quality of homes offered is extremely important. What is the point to buying a cheaper home only to learn after a few months that the walls have developed cracks and the materials used for building are of inferior quality? Think sustainable rather than take temporary price advantages.
- Redecorate house for better returns: This is usually referred to as staging. Setting up the home to make it look appealing and hoping that will justify the inflated prices is rather short-sighted. If you’re hoping to influence prospective buyers that way, you may not succeed. On the other hand, if you’re considering buying a house because it is “pretty” you may want to reconsider your decision.
- Infrastructural development will boost prices: A lot of buyers purchase homes in the hopes that expected infrastructural development in the area will boost prices. The reality is that it drives rental demand and value but does little to improve capital value once the initial stage has passed.
- Get rid of it when you change your mind: One piece of advice the older generation constantly dishes out is that if the real estate purchase doesn’t suit you, you can always “get rid of it”. Real estate is by nature an illiquid asset. This means that it is less liquid in comparison to other forms of investment. So going into a real estate purchase assuming that you’ll be able to sell it off instantaneously is not a great idea.
The better your clarity when it comes to purchasing real estate, the more sound your decision making is likely to be. Shake off those real estate myths and go forth with knowledge.