As any financial advisor will tell you, real estate is an important part of your financial portfolio. First-time investors, though, need help understanding the nuances of earning money through real estate investments. Here are some key pointers that can help you understand three ways in which your property can be a source of wealth and reap the benefits of your real estate investments.
The typical real estate investor buys properties in upcoming residential neighbourhoods and sells them at a higher price, making a profit from the difference. The concept is a simple one, but getting this one right may require some research and experience. Finding the localities and neighbourhoods that are slotted for infrastructural development, such as the launch of metro connectivity or inclusion in the greater metropolitan area, is usually the key. Interest from both private and public corporations drives up the demand from homebuyers too. In these cases, real estate investors prefer under-construction properties to ready-to-move flats. This is because 2 BKH and 3 BHK apartments appreciate in value even as the project comes up.
While buying properties at a low cost and selling with appreciation is a great way to generate wealth, it also attracts capital gains tax. Real estate investors also reap the benefits of investing in ready-to-move apartments by renting or leasing them out. Rentals in most industrial localities in Mumbai are high, creating a steady cash flow for the property owner. Even if the investor has to finance the property through a home loan or borrowing, the rental income often offsets any EMI payments, creating an asset in the process. In addition, real estate investors often buy flats in high-rises and gated communities in busy localities such as Andheri or Bandra, Dadar etc., for the explicit purpose of leasing them to corporates which in turn provide housing to their employees. This lease income is steady and lucrative as well.
While real estate investors are careful with their planning and investments, the average homebuyer can also leverage the benefits of investing in a residential property. Buying a property to occupy it may add an EMI burden, but it also provides great relief through saved monthly rentals. In a city like Mumbai, where rents are skyrocketing each year, a fixed EMI outflow is appreciated by most investors because they can plan their finances and create an asset at the same time. In addition, buying a residential property for family use can help save commutation and travel expenses and offer a better quality of life.
Investing in real estate is a huge financial decision. Research and planning, though, can be a very smart investment. Here are some tips to make the best of it –
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