Individuals want an investment strategy that suits their budget and desires, whether they are preparing for retirement, investing in a college fund, or collecting residual income. A good place to start is to compare real estate investing to stock investing.
There are different investment options available to everyone. For example – Real estate, stock, bonds, cryptocurrency, bitcoin, mutual funds, etc. If you ask your parents where one should invest, I’m sure that the answer would be to invest your money in real estate.
Real Estate Investment = Best Investment
The real estate industry is one of the most well-known in the world. Housing, retail, hospitality, and commercial are the four subsectors. The expansion of this industry is aided by the expansion of the business world, which has increased demand for office space as well as urban and semi-urban accommodation.
From Rs. 12,000 crores (US$ 1.72 billion) in 2019, the real estate sector will rise to Rs. 65,000 crore (US$ 9.30 billion) by 2040. India’s real estate market is projected to grow to US$ 1 trillion by 2030, up from US$ 120 billion in 2017, and contribute 13% of the country’s GDP by 2025. Retail, hospitality, and commercial real estate are all expanding rapidly, bringing much-needed jobs to the region.
- Rental income, appreciation, and profits created by business activities that depend on the property are all sources of profit for real estate investors.
- Passive profits, steady cash flow, tax advantages, diversification, and leverage are all advantages of real estate investment.
- Real estate investment trusts (REIT) are a type of real estate investment trust that allows you to invest in property without having to own, manage, or fund it.
It is indeed true that people will need a place to live with the population increasing. They can earn money and spend but at the end of the day where will they stay? Investing in real estate can help you earn millions.
According to Robert Martinez, “There’s an opportunity for greater and more consistent returns with real estate than with other investments. When a property is built, it’s because a group of people sees a population large enough to justify it.”
“The sheer number of new properties each year is a testament to the growing real estate market. Supply follows demand, and demand is continuing to rise. Populations almost never decrease, which is why the need for housing increases year over year.”
Reasons to Invest in Real Estate :
- Real estate has a predictable cash flow
After interest payments and operating, expenses have been made, cash flow is the net income from a real estate purchase. The ability to produce cash flow is a significant advantage in real estate investing. In certain situations, when you pay off your mortgage and increase your equity, your cash flow will improve.
- Real estate appreciates in value
Rental income, any profits produced by property-dependent business operations, and appreciation are all ways for real estate investors to benefit. Real estate prices rise over time, and if you make a wise investment, you will benefit when it comes time to sell. Rents often have a tendency to grow over time, which may result in increased cash flow.
- Real estate can be leveraged
Leverage is the use of various financial instruments or borrowed capital (e.g., debt) to maximise future return on investment. For example, a 20% down payment on a mortgage gets you 100% of the house you want to buy—leverage. That’s because real estate is a tangible asset that can be used as collateral, financing is easy to come by.
- Real estate provides equity buildup
The majority of real estate is purchased with a small down payment and the remaining funds raised by a lender through debt financing. The mortgage principal balance is gradually reduced over time, initially slowly and then more quickly near the end of the amortisation period. This reduction in principal creates equity.
5. Inflation Hedge
The positive relationship between GDP growth and real estate demand gives real estate the opportunity to hedge against inflation. Rents rise as economies grow and demand real estate increases. Higher capital prices result as a result of this. As a result, real estate continues to keep capital’s purchasing power bypassing some inflationary pressure on tenants and adding some inflationary pressure in the form of capital appreciation.
- Real estate coincides with retirement
When you buy real estate, the cash balance is lower and your mortgage principal is reduced less. The debt is paid off or paid off over time, and the cash flow improves. In several ways, it’s a forced savings program that grows in value over time, making it an ideal retirement investment because it generates more cash flow.
- Real estate is tax deductible
Many tax breaks and deductions are available to real estate owners, allowing them to save money at tax time. The fair costs of owning, operating, and maintaining a property can generally be deducted.
You also benefit from depreciation because the cost of purchasing and upgrading an investment property can be depreciated over its useful period (27.5 years for residential properties; 39 years for commercial) you benefit from decades of deductions that help lower your taxed income.
One last benefit of real estate investing is that it is understandable and easy for the majority of people. It’s simple to buy, fund, and join, and there are no insurmountable financial barriers. Many investors find it easy to upgrade their properties and to take advantage of the tax benefits.
To reduce risk, investors should invest in a variety of asset classes or sectors. Investing in real estate is a great way to diversify your portfolio, lower your risks, and increase your returns. It’s important to remember that many investors invest in both, the stock market and real estate. If you want to invest in real estate but don’t want to own and manage assets, a REIT might be a good option.