7 Real Estate Terms to know Before Investing
7 Real Estate Terms to know Before Investing
If you are purchasing a property – apartment, tenement, house, plot of land, industrial plot or commercial space, high chances are you look at it from an investment angle.
There are a few common terms that keep popping along your investment journey, and we are here today to provide a mini refresher on a glossary of terms associated with real estate investing.
Market value, also known as the basic selling price, is the rate per square feet that the builder or developer decides to offer to the customer for sale. This is the base rate and does not include any form of premiums, additions like high rise or pool facing preferential rates or GST.
A turnkey project is something that is like a plug and play space – meaning all you have to do is whistle and walk in. It is a project that is complete and ready to move. You might come across this term especially with respect to office spaces or commercial floor space – where you can just move in and begin leasing.
Return on Investment:
Return on investment, as the name suggests is a measure of how much your investment has fetched for you in terms of returns. It is measured as a percentage, which is profit earned divided by the cost and fixed expenses you spent on it.
The return on investment is a number that tells you if your investment was a good idea or bad one. If the ROI is high you have hit the jackpot, else you may have to take a relook.
Commercial real estate:
Commercial real estate or CRE is non-residential spaces used for business related functions. These include hotels & restaurants, factories and industrial plots, malls and theatres, hospitals and office spaces. Anything that is used for an income generating activity constitutes commercial real estate. Commercial real estate is considered a good investment in terms of capital appreciation, and a steady source of rental income, and could perhaps be an investment you would want to look at after your first home purchase says a blog explaining Prisha Properties benefits.
These are basically classified into Class A, Class B and Class C spaces.
Class A is the best quality premiere office spaces, multiplexes and malls, new in age, and is in a great location. Class B are relatively older buildings, with good potential, once in prime locales that can be restored and transformed into Class A spaces, or the older buildings in commercial areas that are still worth a buck. Class C, as you may have guessed, are the oldest of the lot, less attractive and need lot of maintenance.
Businesses do not always operate from their own building. With the changing nature of work, a piece of real estate in a prime space is capital intensive, and may not be the first priority for most businesses or start-ups. The rational option is a commercial space taken on lease. The major difference between commercial spaces taken on lease and an apartment on rent is the way in which rent is quoted and the period of lease.
While residential apartments are rented to tenants in terms of a rate per month with an agreement for a period of 11 months usually, commercial real estate is quoted in terms of a fixed cost per sft, and the lease period lasts anywhere between 3 years and 10 years, says a veteran at Prisha Property.
It is simply the amount of cash that flows in and out. Which means it is the net amount you earn from a piece of real estate. Consider you have a flat in Prisha Properties, Bangalore that earns you a handsome 40,000 per month. You can’t calculate your earnings from is as 4,80,000 flat since you also pay property tax, fixed taxes and bill on water and other amenities, or expenditure on any major repairs or renovations undertaken that year that the tenant will not pay for. If your total costs exceed your income it is called a negative cash flow. If the net earnings are more than the expenses you have a positive cash flow.
Floor space Index FSI:
This is a term that the development authority decides upon. Say you have a 1000 square yard plot and want to construct a building on it to give it away on rent. You could consider a 100 floors and earn so much rent, by employing techniques that can allow maximum construction. But that can’t be the case. For purposes other than aesthetics, like the environment, fire safety and other basics. FSI is essentially an index that the government decides on – the maximum allowed floor space on a given land.
Real estate is considered and still is one of the most sought after investments in India. Given our population and the encouraging economic conditions for business, it is still preferred.
Prisha Properties is a name to reckon with in the field of sustainable spaces, committed to building greener cleaner home. We use eco-friendly construction materials, have zero waste, and maximum open areas that keeps both aesthetics, functionality and health in check. Our customer reviews speak for themselves, and we welcome you to come take a look at this growing family!.