According to a Money Control article, real estate prices in India are expected to rise by 10-15%. The lull during the pandemic has changed, and there is an increase in property sales in larger cities and tier 2 and 3 cities because of job creation and overall increased income. With rising costs, the type of funding one will impact all investments. Banks will only lend you money if you have a good credit score, and not everyone has capital funds to invest. However, this does not necessarily prevent one from investing in real estate. What matters is that you have a plan to achieve your objectives. Instead of aiming in the dark without a clear goal in mind, it is always about the ultimate goal first and then backtracking to smaller steps to achieve that objective.
Everyone’s specific life goals are to have enough money, good health, and happiness. How do you use the resources you have to accomplish these simple goals in life? How, in particular, does one invest in the right property not to live in but to generate a consistent monthly income? Perhaps even build generational wealth in the form of property investments. Some people want a large house to live in because society has taught us that everyone needs their own home, which is the ultimate goal. It could be an apartment or a villa. Some people invest in real estate to make money month after month. Others might want it all, a house in the city, multiple rental properties, and a vacation home of their choice. Furthermore, how can you train your mind to recognize a property that will increase in value in the coming years but appears to be a risky investment now?
Most of us have no idea how this market works until we own property. Everyone understands that the right property appreciates in value over time. What you invest in today will yield 10x, 50x, or even 150x returns. But everyone has to start somewhere, and every situation should be viewed as a reality of life rather than a hindrance to dreaming big or planning your future goals. But it all starts with a specific aim in mind. Your current age, family situation, and financial resources will all assist you in determining what your objective should be. Listed below are a few ways of investing in real estate:
1. Occupying a property: The primary goal here is to use the property as your primary residence by taking out a loan against it. The property will increase in value over time; you can customize it to your liking and avoid the hassle of nosy neighbours. It is also essential to be realistic; focusing on a property within your budget is an excellent place to start.
2. Renting out your home: One of the best things you can do as an investor generates a monthly income from your property. The monthly rent can be used to pay off the loan while the property appreciates.
3. Buy and refurbish: In this case, one can unlock the property’s value by investing in the property’s hidden value. It may be neglected or in poor condition. When you buy it for less than the market price, you can reinvest and renovate it to sell or rent it for a higher price.
4. Flip: This is a dynamic strategy. It is investing in distressed property and renovating it so that it can be sold as soon as possible. People have made a fortune using this strategy, but finding a large enough number of properties to flip and sell can be highly challenging.
However, how does one decide which type of property to purchase? Your own home should ideally be the first property you invest in because you would rather pay a loan instalment for a property than pay rent. It doesn’t matter how big it is; as long as it can house you and your family for at least a decade, you’re good to go.
Selling your property: Properties typically increase by 5% per year due to compound interest, which outperforms inflation. That is why compound interest is the most effective way to improve one’s wealth. However, people can become emotionally attached to their properties. It could be family property or property where you have a lot of memories with your family, but if you must be practical and find a good deal, you must sell it and divide the proceeds between two or more properties. As a result, the new properties will appreciate independently and provide higher returns.
Before you get into the real estate market, you must understand the type of investor you wish to be. There are four basic types
- The Safe Player
- The Moderate Investor
- The Risk Taker
- The Full-Time Investor
The Safe Player: The Safe Player is the owner of their home. Their primary goals are to purchase their first home and save for retirement. They do not take risks because their risk appetite is low, and they prefer to keep it that way. When they consider investing, the risks will always outweigh the benefits. Month by month, they make progress.
The Moderate Investor: The Moderate Investor will typically own their own home and one or two additional properties. They play it safe, but they move forward by investing in a different property with calculated steps. The second property always serves as a safety net, ready to be disposed of if there is a family requirement or urgency and knowing that they will be paid back in full keeps them secure.
The Risk Taker: The Risk Taker is fearless and open to new possibilities and opportunities. They have an eye for detail as well as the foresight to predict future returns on a specific piece of property. Money is not something they believe should be saved and deposited in a bank for a rainy day. Instead, they use the money to buy more, invest more, and explore more.
The Full-Time Investor: The Full-Time Investor breathes, eats, and sleeps real estate. They have extensive knowledge in the field and are constantly looking for opportunities to take faster actions that will result in significant results. Fear of losing or making the wrong decision is never what holds them back. It is always about putting themselves out there to dabble in their volatile real estate market with courage and determination to find the best investments.
It can be thought of as four typologies or stages of real estate investment. It’s OK to be vigilant and cautious if that’s your natural personality but on the contrary, making bold but wise investments can drastically alter your life. The bottom line is that you must be motivated to begin somewhere. As you gain more experience, confidence, and wealth, you can advance to the next stage and create a life free of jobs and commitments where you do not have to live from paycheck to paycheck.