We all want to save money whether by purchasing a house, investing in shares, gold, or putting off a family vacation. Everyone has their own ways of saving money. Over the years, investing in real estate has become increasingly popular because of it being a tangible asset and safe investment. Due to this physical aspect, one can never incur losses with the property even in the worst case scenario.
Any investment—shares, gold or silver carries risks due to the depreciation of value of the rupee. The real estate market is driven more by end users, and not by pure speculation like in the stock market and mutual funds. So there is the least possibility of losing the principal. Real estate appreciates because of demand-supply gap and scarcity of residential complexes on a particular area where development is in progress. House prices have been on the rise for the last few years, creating a greater urge to invest in real estate.
The euro-crisis and slowdown in the global economy have shattered investors’ confidence in equity to the extent that they will think twice before venturing into equity again. Investors not only lost their hard earned money as a result of the decline in the market prices of shares but also their confidence in the stock market.
For such investors, a property is one of the safest investments with reasonable yield. Investment in properties has paid more dividends than traditional investment options such as shares, bonds, and gold, with least correlation to the volatility in the stock market. A property is the only physical asset that offers stability, simplicity, and good returns.
House Rent Generates Cash Flows
On renting out a property, one can not only derive benefits of the appreciating capital value over time, but also the rental cash flows. Investment in a property is inflation-protected because with increasing operating costs, the rental income also increases compensating the increased operating cost.
Property Creates Wealth
Property cost gets appreciated with the passage of time. Some properties appreciate more than others; there are numerous instances of real estate owners turning millionaires and billionaires over a span of 10 years.
Properties can be viewed in two ways. After payment of loans, the rental income can become a pension. If the rental income is insufficient, the property can be sold off and the money can be invested in fixed or debt funds for steady returns.
Another advantage with properties is that housing loans are easily available on a down payment of up to 20% of the purchase price, and the remaining can be financed. This gives you leverage, meaning that you can invest in different types of schemes with less money down, helping to build your net worth or income. As an added advantage, repayments to your home loan are exempt from income tax.
Real estate holds more potential, but this does not mean that it is an assured gain. It’s imperative that appropriate properties are identified after thorough research work of site locations and developer’s credibility.
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