13 Theories of Investment in Real Estate

  • Posted by: Sahir
  • 31st October, 2022

Investment in real estate has been considered to be the number one way to build wealth for many years. With well-chosen assets, investors can enjoy predictable cash flow, excellent returns, tax advantages, and diversification. Whether you buy a single-family home that you rent out or a percentage in a commercial complex, real estate allows you to build tangible assets that appreciate long-term while giving you short-term cash flow.

So, if you’ve been sitting on the fence, and wondering why and how to invest in real estate here are some answers to your questions.

Why Should You Invest in Real Estate? Here are the 13 reasons

1. Predictable cash flow and passive income

While stocks and mutual funds may provide quarterly or annual dividends, single-family or multi-family homes that you can rent out give you consistent and reliable cash flow. The predictability of rental income is one of the biggest reasons to invest in real estate.

2. Invest in a historically high-performing market

Historically, Investment in real estate is known for its high returns. Property values generally increase over time, and its low volatility makes it a safer bet.

3. Get access to low-cost financing 

You’re unlikely to buy a property with an all-cash offer. That means you’ll borrow money from a financial institution or a bank. As long as you have good credit, a steady income, and the ability to pay back the loan, you can get started with a down payment of as little as 10%. Debt financing in real estate is not only encouraged, but because it’s common, it’s also cheap.

4. Diversify your investments

Asset diversification is necessary. While the returns from the stock market may be higher, the losses can be acute and sudden. Real estate investment provides a solid level of security to your investment portfolio. If you’ve diversified with real estate, you minimize your risks during economic turmoil and may even find that the value of your property continues to rise.

The real estate offers you many asset classes to choose from, including single-family homes, commercial properties, vacation rentals, and more. You may further distribute your investment across different properties in different neighborhoods or even cities and towns.

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5. Tangible Asset

With real estate investment, there is a feeling of owning a tangible asset-something you can see and touch that gives you more of a sense of ownership and security. If the stock market crashes, your investment could be reduced to nothing in minutes. That’s less likely with a property, even in the market is down.

Having a tangible asset standing means there will always be some value in your investment and potential for appreciation.

6. Less volatile

People will always need a place to live; businesses, are always going to need commercial properties to rent. You’re always going to want to stay in that beachfront property on holiday. Real estate is a necessity that makes it such a safe and secure investment.

You can even take advantage when markets are down by buying low and selling when the market picks back up again. Besides, real estate doesn’t have day-to-day fluctuations. It is a long-term investment that typically trends on an upward trajectory.

7. Tax benefits

As a real estate investor, you’re eligible for several tax breaks and benefits that can add up substantially. You can deduct expenses incurred to maintain the property (repairs, ongoing maintenance, depreciation). When you sell your property, any gains will be taxed as capital gains, not income, which is taxed at a lower rate. If instead, you use the money from the sale of one property to buy another, you can defer those capital gains as well.

8. Hedge against inflation 

Real estate investments are often a hedge against inflation. When the prices of commodities like gas, food, and clothing are rising, so is the rent. So if you’re renting out a property, you’ll begin to see higher monthly income on your investments.

9. Various Asset Types

A real estate investor has a wide variety of asset types and classes to choose from. You could buy unit houses, a flat, or invest in commercial real estate. You could even buy a vacation rental.

10. Long-term security

Real estate appreciates with time, so if you can hold on to it, you not only get the monthly rental income but also capital gains when you’re ready to sell. Not just homes but land too appreciates over time. Many people consider buying land as the best investment in real estate.`

11. Force Appreciation

Forced appreciation refers to the extra value you create when you put money into a property. So, buy an undervalued property, fix it up, complete some renovations, and suddenly the sales price is a lot higher than what you bought it for.  This forced appreciation can come in the form of minor fixes (redoing the interiors) or major ones (updating space as per contemporary style).

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12. Leverage your equity

Your equity in a property is the value of the property minus what you owe on your mortgage. Unlike other investments, however, you can leverage a large portion of this equity to invest in more real estate.

13. Take small steps

You don’t have to scrimp and save for years before you can start building your real estate portfolio. All you need is an amount for a cash-down payment and the rest may be borrowed.

Now that you know how beneficial real estate investment is the question arises of which developer to go with. Pune offers a host of real estate investment options. Namrata Group is a known name and one of the top real estate developers in Pune. This group offers options for both residential and commercial options in Pune and at other places in Maharashtra.

When it comes to investment classes, few offer as much security, reliable cash flow, and asset appreciation as real estate. A real estate investment is also one of the easiest asset forms to pass down to future generations. Invest for your future and your future generations. Check out projects from Namrata Group, a top-notch real estate company in Pune, and book yourself a promising future.