How to Invest in Real Estate For Best Returns

Indians nowadays are looking for new ways to earn more money and live a financially secure life. People no longer rely only on their monthly salary and traditional savings to ensure their future. People nowadays desire to invest their money and generate numerous income streams in addition to their jobs.

The Indian real estate sector is prospering and has become a part of many successful investment portfolios due to its high return on investment (ROI). According to one report, real estate accounts for 77% of the total assets of ordinary Indian households. As a result, if you want to increase your wealth, you might consider investing in real estate in India.

Why Is Real Estate Still The Most Trustable Investment?

Real estate has always been a safe investment option with low risk and the number one choice for investors with a low risk regarding asset accumulation. Despite market instability and the situation created by covid, real estate remains a preferred investment over equities shares. 

However, there was an influence for a year or two after 2020, but it gradually increased and has already reached practically pre-covid levels. With several MNCs and manufacturing enterprises establishing bases in India, the sky’s the limit for residential and commercial investors. Furthermore, the rate of return is stable, and the essential element is the tax exemption it provides in case of a housing loan. Some of the ways to invest in real estate are:

1. Rental Properties

People with do-it-yourself (DIY) restoration skills and the patience to supervise renters may find owning rental properties a good investment. This method, however, requires significant investment to pay initial maintenance costs.

Pros

  • Provides consistent income and property appreciation
  • Maximizes capital through leveraging
  • Many connected expenses are tax deductible.

Cons

  • Managing tenants can be time-consuming.
  • Tenants may cause property damage.
  • Income reduction as a result of potential vacancies

According to US Census Bureau data, new home sales prices rose steadily from the 1960s to 2008 before declining during the financial crisis. Sales prices continued to rise again after that, finally approaching pre-crisis levels.

2. Real Estate Investment Groups (REIGs)

Real estate investment groups (REIGs) are suitable for individuals who want to own rental property without managing it. Investing in REIGs involves both a cash cushion and access to capital.

REIGs are small mutual funds that invest in rental property. Nonetheless, the investment group’s management company manages all apartments collectively, handling renovations, advertising vacant positions, and evaluating tenants. The corporation pays a portion of the monthly rent to provide these management services.

A traditional real estate group lease investment is in the investor’s name, and each unit pools a part of the rent to avoid vacancy. As a result, even if your unit is empty, you will be reimbursed. As long as the pooled apartments vacancy rate is not too high, the costs should be covered.

Pros

  • More hands-off than owning rental properties
  • Income and capital appreciation

Cons

  • Vacancy risks
  • Fees comparable to those levied by mutual funds
  • Dishonest managers are easily deceived.

3. House Flipping

House flipping is for people with extensive real estate appraisal, marketing, and renovation experience. For example, real estate flippers typically strive to sell the low-cost residences they acquire in less than seven months. Real estate flippers are separate from buy-and-hold investors, just as day traders are unique from buy-and-hold investors.

Property flippers rarely invest in home improvement. As a result, the investment should already have sufficient intrinsic value to generate a return with no modifications, or the property will be disqualified.

Flippers unable to unload a property quickly may be difficult since they often do not retain enough uncommitted cash to pay the mortgage on a property over time. This could result in even more losses.

Another type of flipper makes money by purchasing low-cost residences and enhancing their value through renovation. This is a longer-term investment because investors can only buy one or two properties simultaneously.

4. Real Estate Investment Trusts (REITs)

When a corporation (or trust) uses investor cash to purchase and begin operating income assets, then we can say that a real estate investment trust is formed. A real estate investment trust is perfect for investors who want to increase their portfolio diversification by investing in real estate without trying to commit to a traditional property transaction. Like any other type of stock, REITs are traded on major exchanges.

Like other dividend-paying stocks, REITs are an excellent choice for stock market investors looking to find consistent income. To maintain its REIT classification, a corporation must pay out 90% of its taxable profits in dividend payments. Compared to the previous types of real estate investment, REITs provide investors with access to non-residential projects such as stores or office buildings that are normally unreachable to individual investors.

Real estate investment trusts are a type of real estate investment trust that is very organized. You won’t need an estate agent or title transfer to cash out your funding. More importantly, because they are exchange-traded trusts, REITs are extremely liquid. Equity REITs represent traditional real estate investment, whereas mortgage REITs concentrate on revenue earned by real estate mortgage finance.

Both provide real estate exposure, but the nature of that exposure varies. 

5. Online Real Estate Platforms

Real estate investing networks are for people who want to team up to participate in larger commercial or residential projects. The money is invested through online real estate platforms, usually called real estate crowdfunding. 

Online portals bring together project financiers and real estate developers. In some cases, you can mix your investment with less money.

Pros

  • Can invest in single projects or a group of projects
  • Geographic diversification

Cons

  • Management fees
  • Tend to be illiquid with lockup periods

Conclusion

The Indian real estate market is thriving, and being a part of it can provide lucrative returns in the future. So, ride this tidal wave to safeguard your future, live a rich lifestyle, and leave a legacy for your loved ones.

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