Investing in Real Estate: Claiming Your Slice Of The Cake

24 Dec 2019

For ages, a very lucrative and fruitful investment model has been real estate. The concept of having a ‘jaydaad’ or property has led to many historically famous movies, dialogues and compelling stories and the appeal of this investment class has been untarnished by the passage of years.

Like any other investment option, putting your money in property requires a lot of patience and most importantly, availability of cash. So, read on to know more about this investment class and what makes it rewarding to invest there.

Is Real Estate Investment Right For You?

An investor should only turn towards real estate for investment purposes when he/she has no debt, a solid emergency fund, and is looking to fatten up retirement account. But before everything make sure that your finances are settled. There should be no debt fund, easily accessible emergency fund and proper retirement savings. There will also be time when you need to fix something and will need some reserved funds, also you need to have cash for the down payment. All of this should be different from your emergency fund.

Choosing The Right Option

There are many options where beginners can invest but if you are looking for huge returns, you can do that by managing a multi-unit building or fixing a nuclear family home and then selling it. There are various options available in real estate investment, whether you are the beginner or an old player, some basic lines are there, just as big investments will be awarded with big returns.

Also, if you are planning to invest in property, get to know the market, start with your own neighbourhood. Precisely do the research, who moves in? Who leaves? What are the prices? Analyse them, talk to the local broker and get information from him.

Some of the ways that you can invest in Real Estate are:

1. Rent Out A Room

If you want to dip your toes in the muddy water of Real estate, you can start by renting part of your home with websites like Airbnb. Here you do not have to rent for a long time. Also, the company does the screening of the tenant and pays in case of any damages. So if you really want to do it, start small and see how you feel.

2. Investing in REIT

If you are a novice and want to wet your hands in the Real Estate market, you should try investing in Real Estate Investment Trust. These are securities like the stock or other financial instruments where the underlying asset is property. The guidelines for REIT have recently been formulated in India. Here Equity REIT’s are the best options as they allow the investors to pool money for the development, maintenance and purchase of real estate properties.

In this case investors are free from the hassle of taking care of the properties. But it generally focuses on bigger assets like malls, hospitals, hotels or apartment complexes. On the safer side, buying publicly traded REIT’s is considered a secure option.

3. You Can Buy A Nuclear Family Home And Rent It Out

While you are starting you can buy a single-family home and rent it out. It will slowly generate income considering the overhead costs are minimum. But in ideal conditions your mortgage will be fixed monthly, but the rent prices will increase with time, producing money for you.

4. Give A Shot To House-Hacking

It is a simple strategy where a person buys a four-unit building. He lives in one unit and rents out the other three. This leads to a decrease in his living expenses and in turn generated income for his mortgage, insurance and taxes. The leftover directly goes to savings.

5. Try Condo Conversion

Here you buy a multi-unit building, rent out the units and later turning them into condos. Then you sell them separately. Here you will be able to produce a sizable income.

6. Flip Houses

This is by far the most expensive strategy of investment but is also the most lucrative and possesses growth. It is also expensive and time consuming. But you achieve the biggest gains. Here you buy a home, renovate it and then resell it. Here you may also face issues in selling it or, have unexpected problems, the budget may increase a tad bit higher.

So have a good team and ensure that you have proper capital for problems. Generally proper flippers don’t use more money in improvising the property but select a property with value and which only needs a bit of addition.

Key Takeaway

In the end like all the best investment decisions, the best decision will be the one that serves you the best, the investor. Think about all the prospects, whether you want to deal with the household issues, how much time you will give and lastly the capital that you invest. So, if you want to optimize your finances give real estate investment a shot.

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