Why Should You Invest In Real Estate?
The decision of investing your hard earned money can be a difficult. And the plethora of options available makes this more confusing. Add to that the sheer number of factors every investment decision. Every investor has its own risk taking capacity and any impulsive decision can prove to be costly. Reason being, there are various of options available for investing in the market today, having diverse degree of risk-return potential. Experienced investors know for sure that a real estate investment is by far the smartest way of investing if you want to grow your money into something big. The following arguments will help you understand some of the investment options available to you and why we think investing in real estate is a wiser move:
- Cash Flow : Real Estate investment can provide you with above average dividends (income), stronger returns and are far more predictable in terms of offering stable monthly proceeds, than any other instrument of investing. Consider renting you property and you will understand what we want to say. Cash flow is fundamentally profit, the amount that you are left with after paying all your taxes, mortgage payments, maintenance costs etc.
- Tax Benefits : Taxes burn a big hole in everyone’s pockets. Luckily, real estate investments offer a cushion against loss of money through taxes. Even Government applauds rental property owners through various tax incentives and concessions. Right from commercial buildings to rental houses, vacant lands to industrial setups, everything comes under the ambit of offers that includes depreciation, lower tax rates etc.
- Building Equity : Each mortgage payment you are due for each month gets you one step nearer to paying down your principal payments. Unlike rental payments, they build you equity and wealth simultaneously at the same time.
- Leverage Funds : While investing in stocks, it is required of a person to pay up 100% of the investment upfront. Real Estate, on the other hand, offers the benefit of leveraging. One can most definitely buy a property worth INR 50,000,00 with INR 10,000,00 that too without exhausting their own money. Furthermore, leveraging empowers a person to indulge in more than one real estate dealings as all of his/her funds are not tied down to one investment.
- Buffer against Inflation : Inflation is defined as a general increase in prices of the commodity or fall in the purchasing value of money. In simple words, it causes every rupee you own to buy a smaller amount of goods/services. Hence stocks, under inflationary conditions require more money to purchase. On the contrary, Real estate, acts as a hedge against inflation, as it reacts proportionately to it. If inflation increases then so do rents and home values.
- Low-risk as compared to Stocks and Bonds :
Stocks and Bonds are the most popular form of investment in the financial market. It undoubtedly reaps in great profits if the company you have invested in is doing great, to add on to the privilege you find yourself as the partial owner of your company irrespective of what amount you owning. But the market is super volatile. That said, no one for sure can predict the earned dividends nor do they have any control over it.Bonds are slightly different than shares as these do not represent the investor’s stake in the company. As a result, the returns on bonds are predetermined and fixed in nature. Similar to a loan, the company pays back the amount with interest. The lower the rate of interest, the safer is the bond. Risks are lower yet profits earned are marginal in numbers.The advantage of Real Estate over them is:
- They are risk-free, safe and secured.
- Returns are higher.
- Layman knowledge will do.
- More control as compared to investment in Mutual Funds : This is a pool of money from numerous investors who wish to make good use of their money. The pooled sum is then devoted onto varied assets. Its performance is judged in terms or NAV’s dividends, capital gains, total returns spread out over a period of time. However, just like stocks, you have no say over the performance of your assets. You get to choose and pick your investments but have little control over how they will perform in a long run as they are subjected to various variables. Contrast this with real estate investment, where you can choose literally everything about the asset you want to own including location, price among other things.
Thus you can see that real estate investment is far more profitable and gives you far more long term returns than any other mode of investment.
Tags: real estate investment