We hear so much about real estate around us but do we really think…
What is Real Estate?
In simple terms, Real estate is a property made up of a piece of land with a building on it, as well as the natural resources of the land including flora and vegetation, crops, water, livestock, and mineral.
What are Different Types of Real Estate?
Although, we often refer real estate as “real estate market” but actually real estate can be categorized into four types
● Vacant Land
● Residential real estate
● Commercial real estate
● Industrial real estate
Vacant Land – Refers to undeveloped land, farms and ranches. A real estate developer acquire the unused property rezone it to increase its value.
Residential Real Estate – Refers to the underdeveloped land, houses consisting of individuals, families or groups. This is the most common type of asset with which people are familiar with. Within the residential real estate, there are apartments, condos, luxury residential houses and other types of living arrangements.
Commercial Real Estate – Refers to the land or building used to carry out a business or other commercial operations. Examples include malls, movie theatres, retail stores, hotels, etc.
Industrial Real Estate – Refers to the land and building used for manufacturing industries and warehouses. These properties are usually larger in size and typically situated far away from the residential and commercial real estate.
How To Invest in Real Estate Properties in India?
Real estate is a costly investment and hence you must be through before making any decision. If you have enough money, buying a real estate property is the most direct and hands-on way to invest in real estate. There are different options you could explore, some of the important ones are mentioned below.
1) Buying and Fixing up a Home –
Buying and renovating a property is the best option if you wish to design a home according to your wish and then sell it for a profit. But buying and renovating a house requires both time and money. It is a process and you need solid knowledge of both real estate properties and home renovation to make the investment profitable.
2) Rent-to-Own-Tactic –
Rent-to-own is a tactic where you sign a contract promising the lender that you will buy their real estate property at the end of the contract. This is the best option if you like the property and plan to own it in the future.
A percentage of your rent goes in the form of a monthly mortgage of the property. Read the documents carefully and make sure the terms are in your favour.
3) Buy Rental Property –
You could buy the entire rental property and then rent out any rooms to tenants. Keeping the expense low to attract tenants to rent your rooms. You could also keep a part of the property and rent the remaining ones. Either way, you are the landlord. You can manage the real estate on your own terms and earn a monthly profit by paying off your mortgage.
4) Buy Vacation Real Estate Property –
Vacation real estate means renting your real estate property for tenants for a shorter period of time. This means you need to maintain your property and you might make money off a few vacation tenants.
Generally, luxurious homes are used as a vacation rental since travellers usually expect their stay to be in a desirable area. Weigh the pros and cons and contact a reputed realtor to buy such property.
5) Purchase Non-Residential, Commercial Property –
Commercial property is another option for those who wish to invest beyond the rental and residential properties. It is costly but also has a higher return on investment.
As an owner, you can lease your commercial space for businesses who are in need. It is a high risk, high reward investment. The commercial property contracts are much longer than the residential ones and generally demand a higher lease amount.
6) Buy a House and Wait for Appreciation –
Yes, if you just buy a house you become a real estate investor. You could buy a residential property in an area promising high growth rate. Later after living in the house for a few years, you can sell it at an appreciated price. Consistently paying your mortgage and maintaining the property can help you make a profit on your investment. Treat your purchase as a long-term investment and it will pay off over time.
Benefits of Investing in Real Estate Properties
1) Real Estate Investment Improves Community –
The most important sign of community development is its infrastructure. When people start investing in real estate, major projects get sanctioned easily and the area attracts an infrastructure development. This improves the community by increasing the tax collected. Buy developing a real estate in an abandoned lot, you not only remove an eyesore but also help to elevate the self-esteem of the community.
2) Provides a Steady Income –
Investing in rental properties gives you a steady flow of cash. Depending on the location you could be earning a significant amount of money.
3) Provides Long-term Financial Security –
Real estate is the most stable form of investment out there. The major reason why people invest in real estate is that it rarely suffers a depreciation. So if you are patient enough to keep as an asset for a long time, real estate investment is for you.
4) Tax Benefits –
Rental property owners get a tax redemption for owning the property. In addition, the government offers tax breaks for property depreciation, insurance, maintenance repairs, travel expenses, legal fees, and property taxes.
5) You are Your Own Decision Maker –
The best part of real estate investing is that you are your own boss. Just like any other business you have complete control of the assets and the decision making process.
There is no doubt that real estate property is an attractive investment. But with high attraction comes high risks. The investment amount is huge and hence your decisions should not be impulsive. Many recognize the financial benefit and reap rewards for a long time. You need to do thorough research before taking any step. Especially, if you are a beginner. We hope this blog post cleared your basics of real estate properties and gave you a brief idea of investing opportunities.