What Is Bottom Up Approach While Deploying Funds In Real Estate

If your sole objective in real estate is pure investment, it is recommended to consider purchasing a smaller flat as they often provide higher rental yields. Opting for a 1 BHK (one-bedroom, hall, and kitchen) flat would be ideal. Similarly, if you are interested in buying a plot for investment, it is advisable to choose one located outside the city if your investment horizon is 15-20 years. This is because already developed areas tend to have lower percentage-wise appreciation. It’s comparable to teaching a child to improve their scores from 30 to 60, which is relatively easier than going from 90 to 95, which is more challenging. When you find something available at a lower cost, particularly at the bottom of the pyramid, the chances of making a wrong investment are significantly reduced.

Buying a plot where no development in there and no houses are built in nearby area is like buying small cap stock giving very high returns in 10-15 years but on the other side it is also risky to buy because sometimes development will not happen in that area and returns may be not as expected. Similarly if you consider a re-sale plot where one or two houses are built in nearby area, you can compare this land to midcap stock which gives good return after 10-15 years. Similarly if you consider a re-sale plot where society is already developed, you can compare this land to large-cap stock which gives above average return in 10-15 years but risk is lowest. Re-sale plots in already developed society are highly illiquid because supply is very less so there is big difference between bid and ask price but you can sometimes get high profit from selling plots if any urgent buy required.