Why buying a house can be a good investment?

3 minutes, 24 seconds Read
There are many investment options out there and we all get confused between them. But today in this article we will talk about one of the most prominent investment options out there, Real Estate. It was considered one of the best investment options back in our parent generation. But now the buzz of real estate has reduced as new investment options such as equity and mutual funds appeared and today in this article we will talk about how real estate can be a good investment.

Advantages of buying a house/ investing in real estate?
1. Regular cash flow-
House as an investment has one of the best advantages, that it provides passive income. Rent can be regular and a great source of income, it’s a regular cash flow. Also if managing a home and looking for tenants is overwhelming for you, then you can hire managers who on a commission basis take care of your renting out procedure.

2. You can force appreciation-
Similar to other investments, a house also appreciates in value with time. But along with average appreciation, there is also one more option to appreciate real estate and that is by repairs and renovation. This helps you earn some extra rent or can even bring in a higher value while selling. Although appreciation for repairs and renovation is limited it is a plus point.

3. You can leverage your investment-
Imagine you want to buy shares worth 1 lakh, can you buy them for 10000 and pay in installments, NO. But in the case of a house you can, even if you don’t have enough money you can take a loan and finance your investment. This option isn’t available with other investments out there.

4. Take a loan against your house-
You can also mortgage your house and get money instead. This is also available with equity but, it is much easier to mortgage your house as compared to shares.

5. Tax benefits-
Also, you claim tax benefit on your investment in real estate, you get tax benefit through your home loan, maintenance charge, etc.

6. Makes you financially secure –
Also with all the added benefits, a house makes you feel financially secure and you have a place to live. Unlike other investment options, real estate has a practical use and is not just an investment.

What are the drawbacks of real estate as an investment?
1. First of all, real estate requires a huge amount to start investing. While investment options such as mutual funds can be started from as low as 100 rs.

2. The appreciation rate of real estate depends upon various factors such as location, demand and supply etc. so the overall appreciation can be low. Also average appreciation on real estate lies somewhere between 3-4% whereas 8-12% in other investment options.

3. There is maintenance required for a house, while there is no maintenance required for other investments such as equity.

4. Cash flow is not guaranteed, sometimes you may not find tenants.

How to identify an ideal house for investment?
1. Make sure the location is good, and has basic amenities such as school, hospital and parks nearby.

2. Invest in houses that would be suitable for renting and can be sold easily.

3. Apartments with different amenities such as gyms and gardens usually get tenants fast.

4. Pay a look at the average selling price of that area and then buy so that you don’t over overpay.

5. A location which is near to the railway station, airport is always preferred.

How to invest in Real Estate if you don’t have huge funds?
Huge funds are required to start investing in real estate, but there is also another option known as REIT- real estate investment trust, this is similar to a mutual fund where your money is pooled together and then invested in a real estate project.

Conclusion- Overall real estate is one of the best investment option out there and one can surely invest in it. Also real estate serves a practical house and one can live in the house and also get appreciation on it at the same time, making it one of the best investment options.

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *