how to invest in real estate
 

How To Invest In Real Estate? 8 Different Ways

14-Nov-2023
 

How To Invest In Real Estate? The real estate industry has been striding ahead contributing hugely to the overall economic growth in India and has not only become a major source of financial security for many potential investors but also providing employment opportunities to many. Witnessing the pace of growth, the real estate sector is expected to grow in the coming years, which is driven by urbanization, a rise in income, and changes in lifestyle preferences.

Technological advancements have paved the way for modern homes that speak smart with aesthetically appealing features, and luxury without compromising on the authenticity of a good traditional home. With the rise of urbanisation, the demand for modern spaces speaks of taste, authenticity and luxury. Whether buying a home or earning money, real estate has proven ways to strengthen financial security for potential homebuyers and investors.

How To Invest In Real Estate? Real Estate in India and its Importance

how to invest in real estate

India has been growing rapidly with the advancement of technology at every step of the way. Our country presents a unique landscape for real estate investment. Real estate in India is beyond just financial gains; it plays a very important role in the country's economic development, urbanization, and social dynamics. With nuclear families being more prevalent, living in cities, and higher family incomes are expected to keep driving the expansion of real estate like homes, stores, and offices. The Indian real estate market is doing well because it gives a good return on investment. Many successful investment portfolios include real estate. A report says that, on average, 77% of an Indian household's assets come from real estate.

With the end of the pandemic, more and more people have realized the benefits of owning a home instead of renting which has led to the continuous growth of this market. The industry is growing because people are earning more, and want a better quality of life, with everchanging lifestyles, creating a demand for homeownership.

Is Real Estate a Good Investment

The benefits of Investing in real estate are many. Being one of the wisest investment options, the real estate sector has grown by leaps and bounds catering to the unwavering needs of individuals.

  1. By selecting the right properties, investors can gain regular cash flow, great returns, tax benefits, and diversification. Plus, real estate can be leveraged to build wealth over time.
  2. REIT or the Real Estate Investment Trust allows you to invest in real estate without dealing with the ownership, operation, or financing of properties.
  3. Real estate investors earn money from renting out properties, the increase in property value over time, and profits from business activities related to the property.

Benefits of Investing in Real Estate

Rental Income

Rental income can be a huge source of income for potential homebuyers and investors. Certain real estate investment strategies, such as rental properties or Real Estate Investment Trusts (REITs), offer the potential for passive income. The value of land and property appreciates with time, this in turn increases the cash flow.

Tax Benefits

Real estate investors can enjoy various tax advantages, including deductions for mortgage interest, property taxes, and depreciation. Understanding and leveraging these tax benefits can significantly enhance the overall return on investment. Under section 80C, you can save up to Rs 1.5 lakh on the home loan principal, and section 24 allows a reduction in interest payment by up to Rs 2 lakhs. This significantly cuts taxable income and reduces the overall cost of real estate investing.

Long-term Value Appreciation

One of the most important aspects to know while understanding the pros and cons of real estate investment is property value appreciation. If market rates increase, the property's value goes up, making it easier to sell. Even if the value stays the same for some time, proper maintenance and management can generate a steady rental income. All investors must research before deciding to buy in a particular area.

Financing and Leverage

Real estate offers various income sources and grows in value because it's a physical asset. Unlike stocks, its value remains stable. It's easy to buy, and finance and can enhance your lifestyle with added tax benefits. There are no significant financial hurdles. Leverage, the ability to invest with a small amount of your own money and borrow the rest, is a major advantage in real estate. You can invest in top-notch real estate with just a 15% investment, using savings for a down payment and a mortgage for the rest.

Tangibility

Real estate is a tangible and physical asset. Unlike stocks or bonds, investors can see and touch their investments. This tangibility can provide a sense of security and satisfaction for those who prefer assets they can physically interact with.

Points to Consider Before Investing in Real Estate

Financial Readiness:

Assess your financial situation thoroughly. Understand your budget, credit score, and overall financial health. Ensure that you have a stable income and emergency funds in place before venturing into real estate.

Define Your Goals:

Clarify your investment objectives. Are you looking for long-term appreciation, regular rental income, or a combination of both? Having clear goals will guide your investment strategy and property selection.

Market Research:

Conduct thorough research on the local real estate market. Understand current trends, property values, rental rates, and the overall economic outlook. Different areas may offer varying opportunities and risks.

Risk Tolerance:

Real estate, like any investment, carries risks. Evaluate your risk tolerance and consider factors such as market volatility, potential economic downturns, and the specific risks associated with the type of real estate you're interested in.

Type of Investment:

Decide on the type of real estate investment that aligns with your goals. Options include residential properties, commercial spaces, real estate investment trusts (REITs), or even vacation rentals. Each type has its dynamics and considerations.

Location Matters:

The location of a property significantly influences its potential for appreciation and rental income. Consider factors such as proximity to amenities, transportation, schools, and the overall development plans for the area.

8 Ways to Invest in Real Estate

How to invest in real estate? From buying a physical property to investing in financial instruments connected to real estate, the following are some ways to invest in real estate:

1. Buying a Property

One of the primary ways of investing in real estate is by buying a property. Investors either buy a property directly or through a loan and own it for a long time. They can purchase residential properties like apartments, villas, plots, and more. By doing so you get the full ownership and control over the property.

2. Real Estate Investment Trust (REIT)

REITs offer a hands-off approach to real estate investing. Investors buy units of a REIT, like shares in a mutual fund. An REIT is a company that owns income-generating real estate, like offices and hotels. It shares at least 90% of its income with investors as dividends. It ensures high liquidity and diversification.

3. Infrastructure Investment Trusts (IIT)

Investing in InvITs provides a hands-off approach to real estate. Investors purchase units of an InvIT, like shares in a mutual fund. InvITs are companies that own and manage income-generating infrastructure assets, such as roads and power plants. They share at least 90% of their income with investors as dividends.

4. Real Estate Mutual Funds

Real Estate Mutual Funds offer a hands-off way to invest in real estate. Investors purchase units of a real estate mutual fund, like a normal mutual fund. This fund invests in the securities of companies in the real estate sector, like developers and builders. The goal is to give investors both capital appreciation and income.

5. Exchange Traded Funds (ETF)

ETF is another type of real estate investment. Investors buy units of an ETF, much like other ETFs. An ETF follows an index, like the Nifty Realty Index, which includes stocks of real estate companies. The goal of an ETF is to give returns similar to the tracked index.

6. Fractional Ownership

This is another way to invest directly in real estate. Instead of buying an entire property, investors purchase a fraction or share of it. They can choose to buy shares in residential or commercial properties based on their goals, budget, and preferences.

7. Fix the Property and Sell

When it comes to fixing and selling a property, a potential investor would seek a property that requires a good amount of maintenance and repairs. Subsequently, they would aim to sell the same at a higher price to potential buyers. This approach allows investors to make a profit by enhancing the property and capitalizing on market conditions.

8. Online Real Estate Platforms

There are real estate investment platforms available online these days. These platforms are for people interested in joining others to invest in larger commercial or residential deals. The Investment is done through a platform called real estate crowdfunding.

Conclusion

At Victoria Realtors, we offer premium residential properties to potential homebuyers and investors. We understand that real estate investment is a significant decision that requires an immense amount of research and preferences; therefore, we strive to provide not just homes but opportunities for long-term growth and satisfaction.

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