“Buying real estate is not only the best way, the quickest way, the safest way, but the only way to become wealthy.”Marshall Field
Investing in real estate or good property is one of the best fixed asset you can have for long time and investment. So, there are several reasons in real estate to invest, as it’s a tangible way to have a fixed asset for future investment. As investors are looking to choose various methods before investing in real estate, people look after – residential properties, commercial properties, new project launch and much more. Before investing in real estate everyone has to look after market, trends, decision and much more.
As you are an investor and looking to invest in real estate and properties, we put together some of the important reasons for investing in real estate. So here are 7 important reasons while investing in real estate.
Talking about real estate it is the best and safest way to invest other than stock market- based investments in today’s world. Buying and holding properties can give you best returns as it is almost a better options other than mutual funds, bonds and stock market. Differentiating on various factors such as population growth in cities and employment rates, there are some numerous other factors which can affect it.
High Tangible Asset Value
There will be a good value for your land a good value for your home. Investing in real estate can give a high tangible asset value other than investing in stock which can just go to zero or any other thing such as car which decreases its value over time. Tangible assets represent a higher change at high returns than capital assets.
Real estate gives you passive income when renting the properties you own. In real estate market there are two ways to generate passive income – the revenue system created by rental income and the other is the profit increasing the value of the property. Your own property gives you a continuous source of income which will rise overtime. Rentals thus depend on the size of the house and its location factors.
Leverage in simple words can be said as borrowing someone else’s money to make a good real estate investment. Take an example: An investor has ₹5,00,000 to put toward single-family rental real estate. There are number of option to use –
• Option 1: Buy a ₹5,00,000 property for cash. This approach produces no leverage.
• Option 2: Put the ₹5,00,000 toward the purchase of a ₹10,00,000 property, using financing like a bank mortgage loan to cover the other ₹5,00,000. This produces 50% leverage.
• Option 3: Put the ₹5,00,000 toward the purchase of two ₹10,00,000 properties, again using financing to cover the remainder of the purchase price. This produces 75% leverage, and spreads your potential gains and risks over two properties.
Inflation hedge in real estate involves investing in our own asset and is expected to grow or maintain its value over a specified period of time. Property values and rents increase during the time of inflation which is why real estate is considered a hedge against inflation. Purchasing power becomes more powerful and helps in volatile economy. Real Estate is a better inflation hedge than stocks because its value grows overtime. Investing in a residential property offers the best inflation hedge because of its sustainable value growth overtime.
Investing in real estate can help us to save money in the short term through less tax deductions. Investors investing in residential properties can avail a number of tax benefits. In case the house property is self-occupied, an individual can claim a deduction of interest paid on housing loan, up to Rs 2 lakh per financial year. Holding the property in joint names will provide you a tax benefit to individuals who receive rental income as well. As per section 54 of the Act, if an individual purchase another residential house property within stipulated timelines, the amount invested in the new house can be reduced from the taxable capital gains. As per section 54EC of the Income Tax Act, if individuals invest in specified bonds, they can claim a deduction up to Rs 50 lakh on the capital gains derived from the sale of house property.
The government has launched some various series of initiatives to encourage more people to invest in real estate market. Government has launched ‘Housing For All’ program where they have initiated Pradhan Mantri Awas Yojana (PMAY) and Credit Linked Subsidy Scheme (CLSS) to provide special subsidies for first time home buyers. Real Estate Regulatory Authority (RERA) has been introduced by government to eradicate the problems occurring within the real estate sector. Assurance of strict adherence to deadlines, legit certifications and protection against fraudulent developers.
An investment in real estate sector is not only a safe financial investment, it is also an investment that can provide you better returns for your future value.
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