January 09, 2023

How to profit from real estate investment

There are a number of reasons why investing in real estate can be a wiser, and in the long run more profitable, decision than playing in stocks or the bonds market. For starters, one can pick up a property by paying only a fraction of the actual cost and the rest in comfortable EMIs. The property still becomes your own and you can leverage it. You can earn rental income from it to offset your EMIs or even re-sell it if the market is buoyant. It enables you to save on taxes while real estate never fails to appreciate in value if you give it enough time.

To reap optimum rewards from real estate investment, it’s important to educate yourself, network well, be patient, comprehend the risks and seek professional advice when needed. Perseverance in this arena more often than not leads to success.

What are the main avenues of earning from real estate investment?

# Rental income: Since more than 32% of people in India live in rented properties, renting out your real estate asset is always a great option since while you benefit from a regular revenue stream, your property continues to appreciate on its own.

# Leverage your investment: You can invest only a fraction of a property’s actual value and own it. You will most likely be able to obtain housing finance to fund the rest provided you have a decent credit score and can show a steady income. With time, you can repay your home loan and also leverage the appreciation of your property.

# Ensure appreciation: On an average, any real estate asset appreciates up to around 5% every year without you having to spend a dime on it except for basic maintenance. This is the natural appreciation. However, you can boost the escalation by spending on some incremental repairs and renovation/remodeling. At times, such alterations and improvements can accrue benefits worth nearly 90% of your investments.

# Get tax breaks: As a property owner, you can reap the benefits of a clutch of tax write-offs, including interest on your loan, maintenance expenditure, real estate taxes and insurance, depreciation and others. When you club them together, these can add up to a substantial amount which is your neat gain.

# Earn steady money: When you rent out your property, you earn a steady monthly rental income. This is over and above the appreciation your property will gain naturally.

# Secure your future: As the pandemic underlined, stock markets can be extremely volatile and are tied to so many dynamics. However, real estate more often than not, will keep on appreciating if you give it time. Of course, there could be a hiccup here and there, troughs and crests, but eventually you are more likely to find yourself riding a crest, because real estate has this unique propensity to always bounce back. It’s also a great source of retirement benefit.

# Pass it down to NextGen: When you are leaving behind a real estate asset for your children, you are leaving behind an ever-appreciating and stable legacy which they can leverage. It gives them a great opportunity to make it sweat in any which way they deem fit.

What to look for in a property before you invest:

# The location must be attractive for prospective tenants and it makes sense to invest in a fast-improving neighbourhood.

# Look at the amenities and conveniences around, like schools and colleges, hospitals and shopping centres, etc.

# How safe is the area? Safety and security will always be a major concern for a prospective tenant.

# Study the prevailing property rates and recent sales in the locality to get a grasp of the full picture. It will help you in making an informed decision on your investment.

All said, real estate clearly offers you the least risks while considering investment options. While you can enjoy cash flow even as your asset appreciates, it also gives you instant liquidity should you need it, and more often than not, you can sell at a decent profit. However, nursing your real estate investment over a longer period normally yields bigger benefits.

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