The Secret of Becoming Rich Fast; How to Invest in Real Estate and Buy Your First Rental Property in Sri Lanka
Investing in real estate is the modern way of generating wealth with a high return on investment as time goes by. Since land is limited in most parts of the world, by investing in Sri Lanka in areas where development takes place, an investor can generate twice or thrice as its initial investment. A common strategy used by investors besides buying land is purchasing built property and letting it out on rent. Through this they earn a rental yield, a monthly rental and also benefit from an appreciation of property value. But how do you buy this property?
#1 Know where to invest
Properties for sale and properties for rent in Sri Lanka are available across different parts of the island. But not all of them are equal in worth and value. The distribution of resources and the growing interest in tourism in particular areas also impact the value of property here. The Western Province is the most developed province with properties in Colombo being valued high. With the facilities and infrastructure development taking place, this value keeps rising further. But in areas like Nuwara Eliya, Galle or Kandy, when compared with Colombo, there is a huge influx of foreigners and elite locals visiting. There is a rising demand for rental properties for short stays and tourism is always flourishing.
To benefit from this, you need to plan your investment right and know where you’re going to be investing in Sri Lanka. You can be living in Colombo and investing in Galle or living abroad and buying apartments through SL- REIT (Sri Lanka Real Estate Investment Trusts) to rent out in Sri Lanka. There is no restriction to a location for investment. But planning and working with property experts and looking for the best properties to invest in can go a long way in generating the return you expect.
#2 Financing your investment
The best way of financing an investment is through a bank loan. Certain banks expect you to pay a 25% down payment to sign up for the loan, while others have higher rates. But by choosing to fund the investment through a bank you can make sure that you buy property in the safest possible way.
To get your loan approved, banks have different documents that you need to submit. Some of them are;
- A letter confirming your employment and remuneration details by the employer
- Bank statements from other banks for the past 6 months where your salary is being credited
- Salary slips for the past 6 months
- Title deeds and survey plans related to the property
- Documents from the local authority
- Street and Building line certificate
- Non-vesting certificate
- Certificate of ownership issued by the Municipal Council
- Rates paid receipt for the last quarter
- Copy of the approved building plan (to purchase/for construction)
- Certificate of Conformity
- BOQ – an estimate of construction
- Income tax receipts
- Documents to prove the source of funds to meet applicant’s contribution
- Documents related to insurance
If you are unable to get your loan through a bank, you could also check with other financial institutions to fund your investment. Read up on their policies and compare the interest rates as well before selecting one.
#3 Finding your best investment
From apartments to houses and lands you can choose to invest in different properties. But you need to select one which brings in the most returns to make the best use out of your investment. For this you need to know to analyze the property, its worth and forecast your return.
But now, though you might not be aware of how to invest in real estate or how the property market works, you can reach out to a real estate investment manager who will handle the entire process for you. They will make sure you earn a profitable return and even deal with your tenants for you. Researching out on your own through established property sites that have developed simple systems for even amateur investors is another option to try out.
With an investment return calculator and top properties generated according to an algorithm, LankaPropertyWeb developed the investment section for experienced and new property investors to find the best investments in Sri Lanka. For further assistance, we provide a buyer seller assistance service that will connect you with our property experts to help you work out through your investment.
#4 Search for good deals
What makes an investment a good deal? Simple, it’s how much ROI you’re going to earn at the end of the day. To earn this ROI, you need to find the right property and to find the right property you need to explore different deals.
Moving with the modern trends, now even in Sri Lanka people advertise property online. Most sites provide information about the property and help you connect with the owners easily. In fact, now it’s much easier to find information on a range of properties all at the same time. Read up on the information available online related to the property market in selected areas, the expected developments to take place and compare and select the best investments.
Once you have gathered a few options, the next step is to contact the owners and make your best offer for the property you are investing in Sri Lanka. Some of these properties might be up for negotiation while others have a set price. Find the one among those that you think is the best deal for you and invest.
#5 Due diligence
Between the period of signing the contract, you need to check through the property you are investing in Sri Lanka before finalizing the deal. Everything you do during this time is called due diligence. Checking the standard of the property, checking out the tenants and their rental payments if you’re purchasing a property that has already been rented out, and selecting a property manager for your property are some details to attend to. Consider applying for insurance also before making the down payment to the bank and closing the deal.
Even after you have closed the deal, your investment doesn’t just stop there. You need to manage it in a way where there’s minimal damage to the property and that its standard is maintained. Collect the rental on time if you’re working on it by yourself and make sure tenants follow the conditions set by you in the contract. This might include payment of utility bills, etc.
Investment in real estate is a numbers game and a journey. If you learn to play it well, you’ll certainly be rewarded equally. But if you don’t, you can always reach out to professionals like us and we’ll help you win!
Posted Date: 15th June 2021