While significant capital might be involved, real estate investment remains one of the safest bets in the modern day and age. The projected target for this fixed asset sector is estimated to be ₹13 lakh crores this year despite an 8% increase in overall prices. Driving this sudden increase in property demand are the millennials looking to upgrade their standard of living and invest at an early age.
Nevertheless, let’s look at some critical pointers of why real estate continues to be a popular choice among investors, ensuring return on property investment.
- A steady cash flow through rental income
- Tax benefits
- Increasing appreciation
- Highly viable investment option
- Healthy ROI in most cases
Now that we’ve understood why you should park your money in the real estate market, let’s look at ways to earn you a good return on your investment.
1. Long-term rentals
One of the traditional ways to reap benefits from investing is leasing out flats for the long term, ensuring a steady cash flow. Any property rented out for more than six months is a long-standing association between the tenant and the landlord, which, if extended beyond twelve months, requires registration. Nonetheless, the average leasing period continues to be eleven months.
2. Commercial property rentals
Investing in commercial properties is ideal if you want to make long-term profits, given its high risk-reward ratio. It’s not necessary to furnish the property as the demands of every tenant would differ depending on the type of business. The landlord need not worry too much about maintenance as the leaseholder would make extra efforts to ensure the place of business attracts customers.
3. The concept of house flipping
Simply put, a buyer purchases a property and holds it until its price increases further, ultimately selling it, terming this process as house flipping. No doubt, the owner can make a good profit, but the risk is equally high, courtesy of the volatile nature of the market. You could deck up the house to increase the property's value, adding the latest features and amenities.
4. Offering property for short-term vacation rentals
Companies like Airbnb, Expedia, and OYO Rooms have their entire business model based on giving a tourist or visitor a home-like feel over a hotel stay. Hence, owners can list their homes on these popular websites once approved. Cities like Mumbai and Delhi remain significant players in this industry.
5. Real Estate Investment Group (REIGs)
One of the best options for those wanting to invest in real estate is to avoid the hassles involved in overseeing and maintaining them. REIGs are companies that buy or build a set of properties and then allow the investor to purchase them via their forum. You can own as many units as you want as a single owner. The REIGs manage the maintenance, agreements, tenants, and other management functions in exchange for a percentage of the monthly rent.
6. Real Estate Investment Trusts (REITs)
This type concerns commercial properties. An investor can now enter the market involving large-scale and income-generating properties such as malls, warehouses, office buildings, and hotels. The capitalist makes their returns from a share of the income generated from commercial real estate.
7. Invest in upcoming areas
Though this may involve a certain amount of risk, an investor should choose a developing area over a well-renowned locality as they are higher in price and out of reach, especially for the middle-class segment. Investing in developing regions could offer higher ROI in the coming years.
8. Properties should be well-connected
Even top-class infrastructure and the best amenities cannot solve the problem of a property not being well-connected. In a city as congested as Mumbai, you may not want to waste most of your time travelling for work or other purposes. Therefore, it is advisable to invest in locations that at least have an effective network of roads, railways or metro.
9. The presence of social infrastructure
Investing in properties close to essential services like educational and medical institutions is a wise decision, as it will help provide an increased ROI in the future. The demand for properties with these accessible services is exceptionally high among renters.
In conclusion, putting your money in real estate is a safer option than other forms of investment, despite the massive amount of money involved. In the modern era, there are many ways to make money in this sector, stretching beyond the old-age forms of resale and renting out. Bodies like the REIGs and REITs relieve you from all the hassles and additional responsibilities. The recent pandemic has not affected this industry. On the contrary, buyers now want to live lavishly and comfortably, with finances not being much of an issue. With the real estate market projected to be worth ₹13 lakh crores, this is the best time to invest.
