Investors, builders, and developers have ameliorated Karachi’s real estate sector through the expansion in rural, urban, and the outskirts of the city of lights. Due to this, diversification occurs in real estate investment types, which in turn helps everyone involved to any extent in the market.
Every month, more than a million property listings are recorded in Karachi, utilizing both virtual and on-site sale mediums. The majority of such properties follow a proper investing strategy induced by buyers to test out different possibilities.
As real estate is one of the booming businesses and the most trusted business in Pakistan, people tend to look towards the following six investment types for their property listings. In this blog, we are going to cover just that thing and explain to you how to leverage each of them in your investment strategy.
Residential Real Estate Investments Types
It’s one of the basic, fundamental, yet widely used real estate investment types in Karachi. Making a residential investment is, on its own, a complete game based on several factors that, if ignored, can cost you your capital. Such parameters can be:
- Country’s overall economic growth, GDP, and health of the market.
- Location for the investment.
- Area’s demographics.
The national economic situation, in our case, Pakistan, considerably affects the real estate market due to changing interest rates, the environment, mortgage rates, gross domestic product, and an unemployment rate. Let’s briefly understand them one by one.
Let’s say you have bought and are holding a property; in this case, the ‘high-interest rate’ will apply to your asset proportional to the term of holding. The longer you hold, the more interest and property taxes you have to pay.
Similarly, GDP growth of less than 3% is inadequate for property investments; varying mortgage rates with high interest will do damage in the long term; the unemployment rate tends to make people change homes constantly, further deteriorating property appreciation rates in the city.
"It's important to consider the interest rate, GDP, unemployment, and other aforementioned aspects before plunging into residential real estate investment."
Commercial Real Estate Investments
Commercial real estate includes almost everything that is dedicated toward working space rather than living quarters. Examples of such spaces can be hotels, office areas, malls, brand outlets, business enterprises, storage houses, and even a small Kirana store.
Commercial spaces are the second essential element of two primary real estate investment categories. However, this investment type brings more classification and sophistication than its counterpart: residential investment.
Such as, even office spaces are divided into three classes – A, B, and C – in which A is the most well-versed property type in terms of age, location, quality of life, structure, material, and others. Moreover, investment options for commercial spaces are expanded into different mediums: leases, rentals, or simple full, one-time payments.
Simply put, real estate investment in Karachi pertaining to commercial buildings requires appropriate management from the property owner. Site marketing, keeping reliable tenant turnover, managing rent charges, tweaking infrastructure as per tenant demands, and whatnot all come on the shoulder of the landlord.
Important: One can ease their burden by choosing smart real estate services for managing, renting, and marketing their property efficiently.
Furthermore, you can plunge into commercial property investment through direct and indirect acquisition.
- Direct investment occurs when someone – like you – goes out and buys a physical piece of commercial real estate, which requires considerable capital.
- Real estate investment trusts – REITs enable multiple investors with variable capital to invest conjointly in a bigger project so that when appreciation occurs, all of them shall take their part.
Raw Land Investment Types
Raw land is an undeveloped, barren plot owned by the state or other third parties. Anyone can see such lands on the outskirts of a town or city where the expansion – housing societies or rural-to-urban influx – hasn’t made its way possible. Due to this, they are inexpensive, easily tradable, and require a lot less capital to manage.
Investment in raw land requires significant capital to purchase the allocated property. Once the land is in possession of the buyer, he can do the following things to turn his investment into a money-making asset:
- An investor can allocate and build residential or commercial sectors on the land and do business like any other housing society in Pakistan. However, this advice is really not a beginner-friendly one.
- Livestock and raw crops are low-income, high-yield investment ideas suitable both for a beginner and an experienced investor.
- Similarly, farming is another dimension that you should look towards as they provide consistent cashflows with minimum capital seed. Moreover, you can also allocate places to local farmers or associations and ask them for monthly or annual returns.
You may be considering of ‘buy and hold’ strategy for raw land investment. Well, you can do that, but it’s not feasible and worth of time, as the appreciation rate of the raw land goes up quite sluggishly. Thus, the aforementioned three options are worth looking into for inducing a better rate of returns.
Rental Properties Investments Types
Rental properties as a real estate investment type? Easier said than done. Such investments carry multiple complexities to deal with and require buyers to master a handful of aspects before starting their expedition. The following are the responsibility of the investors who have decided to pursue rental property investments:
- Obtain a property after carefully examining property documents, binding legal papers, and creating property rights.
- Mend all damages, repairs, and cleaning works to give new buyers a clean look at their potential house.
- Maintain emergency budgeting in case a severe storm hits the house fence unexpectedly.
Fact: Hiring a property manager helps you automate most of the tasks, including taking care of late rentals, tenant checks, repairing damages, and overall upkeep of the property.
- A landlord must have the know-how of the property law needed for an appropriate settlement of the residents.
- Similarly, as an investor, one should know all the matters related to property insurance or, more precisely, landlord insurance.
- In the end, during property purchasing, its location, mortgage payments, future potential, and others also count on the property owner.
As we have said, this may look like enough work, but they can all be automated quite easily by hiring people and opting for various services.
Real Estate Investment Groups
This real estate investment type may not have heard much, but it has significance in Karachi’s real estate environment. Basically, the concept of such investment is to make groups of people who are willing to invest a big chunk of capital in a potentially reliable estate.
Though real estate investment groups aren’t limited to any particular way to invest, the group using the participant’s consent, can decide which project to finance, flip, lease, manage, or hold for the long term. Investors having different perspectives are always looking to find ways to invest in REIGs, thus, you don’t feel isolated once you opt for this option.
Online Real Estate Platforms
There are sites around the world and also in Karachi that provide the acquisition of real estate assets virtually by your laptop or mobile. In the post-Covid world, where almost everything has been influenced by the word ‘online,’ real estate isn’t any special case. The ongoing sensation of doing anything from home is changing how we buy real estate.
We are seeing how websites, like RAAS and others, are allowing people to buy and sell their property projects by going the appropriate medium put forward by governing law and site owners.
It’s better to ask a professional before plunging right into all the real estate investment types. These types tend to make a person more flexible and allow them to leverage their investments as per their inclinations.
Questions or concerns about real estate investments in Karachi? Connect with RAAS expert for smart future investments.