Today, 50 is the new 60. Retiring at 50 is doable if you utilize the correct tools to build your money. Your investments must work as hard as you do to secure you in the golden years. People use the stock market as one of their financial alternatives. However, owing to its instability and complexity, many prefer to diversify their money. Real estate investments in India are a reliable choice for a retirement-oriented portfolio. So, yes, you can retire early with real estate investments in India.
What springs to mind when you consider retirement? Vacations, time spent with loved ones, or even life by the sea? However, reality may be completely different. Max Life Insurance India Retirement Index Study reports that 9 out of 10 urban Indians are concerned that their retirement funds may not endure. Why are we unable to save enough money? Procrastination is the primary cause. Immediate priorities like paying for education sometimes take precedence over retirement planning. So, if you do not want to spend your senior years worrying about running out of money, it is critical to start proactively creating a retirement plan. But, where can you better invest your money? Real estate investment.
Many individuals avoid real estate investments because they feel unstable or need a massive initial commitment. Assetmonk, for example, can help you invest in the top commercial real estate properties for as little as Rs. 10 lacs. Fractional ownership also provides accessible real estate investment options. When addressed carefully, real estate may help you develop wealth and passive income for your retirement years while also safeguarding your investments from market instability. Historically, real estate investments have been an inflation hedge, protecting against a reduction in the buying power of the rupee. Prices in locations may plummet over years or decades. However, most investors who see this pattern will sell their homes before losing money.
Why real estate investing tho?
“Is real estate a good investment for retirement” is a question we all have pondered. But, firstly, let us see what real estate is. Investing in real estate entails purchasing villas and flats. Is that how you perceive real estate investments? Let us be honest: we have always thought of real estate investments as simply that. However, real estate is much more than that. Real estate investments are of two types: Direct real estate investing and indirect real estate investing. A direct real estate investment allows a landlord to own and manage properties. Residential real estate is an example of direct real estate investing. Indirect real estate investments involve putting money into a trust or a corporation that owns and administers buildings. REITs, REIGs, fractional ownership, and real estate crowdfunding are some examples. A commercial real estate is also a tempting option for investors and potential buyers.
Real estate frequently beats other asset classes and is less volatile than other private investment alternatives. Real estate may be a valuable asset class and the best tool for diversification. It is not correlated to other financial markets and can generate revenue through rents or refinancing. With a hold time of four to ten years, it may get viewed as a long-term, retirement-friendly strategy. As part of a diversified portfolio, investment properties have the potential to produce monthly income and appreciation. Thus, there is a guarantee of real estate investment for retirement income. It is also commonly used as a hedging tool against inflation.
But, where should you invest in real estate for retirement?
- Commercial properties: Commercial real estate is the most appealing investment strategy. It provides a steady stream of rental income and asset gain. The rental income for commercial assets fluctuates between 5% and 12%. Commercial real estate, if owned, might be a very successful source of revenue for the foreseeable future. One way to create a guaranteed revenue stream is to own a CRE property and lease it to established enterprises for rental income. Because rents climb every year, this keeps you ahead of inflation. The return on investment for commercial property is also between 6 and 12 percent.
- REITs: REITs allow you to invest in real estate without owning and managing the property. They are also one method to obtain exposure to the real estate industry without substantial investments. REITs are an excellent alternative for stock market investors seeking stable income. They give investors access to nonresidential projects like malls and office buildings that would otherwise be inaccessible to regular investors. REITs are renowned and offer investors a minimum yearly return of 7-8 percent. REITs also provide flexibility concerning the lock-in period. Investors can liquidate their holdings quickly. However, because we are considering a retirement portfolio, it is best to adhere to the investments for a longer time. Before investing in REITs, investors should be aware that REIT distributions get taxed as ordinary income.
- Fractional Ownership of CRE: We are no stranger to“You need a huge budget to be able to invest in a commercial property valued at Rs 350 crores”. That statement would have held decades ago. But, that is no longer the case now all, thanks to fractional ownership. You can now invest in the 350 crores commercial space with a minimum of Rs. 10 lacs. Numerous investors pool their funds to purchase a high-end office property. The investors or co-owners split the expenditures and earnings connected with the property. Rental revenue gets provided to investors equivalent to the quantity invested in real estate. The capital gain on the sale is also distributed proportionally to the investors. Co-owners of the property also enjoy rental returns starting from 6% to 10% each year. Thus, fractional ownership is a fantastic option for retirees seeking a steady rental income. Industry experts state that fractional ownership is a low-risk, high-return investment in any retirement plan. Senior citizens can invest up to 25% of their assets in fractional ownership to create continuous rental income and capital gains.
- Real Estate Crowdfunding: Real estate crowdfunding is when a group of investors pool their capital to invest in a real estate project. These individuals may provide financial assistance for existing or future real estate businesses by contributing to a pool of cash obtained from others with similar interests. Such possibilities might take the form of residential or commercial holdings. They can involve either the construction of new housing, retail, or office space or a share in an existing holding. Crowdfunding allows you to participate in a real estate investment venture without paying extra money or dealing with the hassle of owning and managing the property yourself.
But should you rely only on real estate rental income to fund your retirement?
One of the most attractive sources of passive income is rental income. Rental income is generated by investing in real estate and leasing it out for a living. It, however, will not be enough to pay for your post-retirement needs. For various reasons, having a backup source of income aside from rental income from real estate assets is critical.
One should have a separate rental income during retirement to offset the risks and uncertainties of ordinary life. It also aids in keeping up with inflation. It also aids in the development of a sizable corpus for a comfortable post-retirement life.
Rather than depending on rental income from real estate investments to fund your post-retirement expenses, you might invest in other options. You can invest in fixed deposits, mutual funds, the national pension system (NPS), dividend investing, and the Senior Citizen Savings Scheme (SCSS). Thus, generating extra money for retirement from sources other than renting can heavily improve your life. Your additional funds can also assist in mitigating the risk of unanticipated costs and uncertainties. Having a backup source of income has various advantages, including minimizing the financial risk of relying solely on one source of income. Even if it is not realistic in a month or two, the small number of extra bucks you make each month may help you save in the long term.
Real estate investments have traditionally provided investors with a sense of security by allowing them to possess something concrete. However, it is quickly becoming a viable choice for diversifying investments, creating new income streams, and securing the future. Yet, just like any investment, real estate is not without danger, albeit with a lesser risk component than most other possibilities.
Do you wish to invest in real estate crowdfunding and commercial real estate fractional ownership? Assetmonk is a Hyderabad-based investing platform that focuses on high-grade real estate crowdfunding and fractional ownership options in Hyderabad, Chennai, and Bangalore.
Real Estate Investment for Retirement FAQ’S
Financial planners report that real estate properties produce steady income. Thus, it is a vital component of a successful retirement portfolio. Real estate has also provided many people with a comfortable living by allowing them to establish a portfolio of real estate holdings.
The Indian real estate sector is predicted to reach $1 trillion by 2030, rising from $200 billion in 2021. It gets expected to contribute 13% of the GDP of India by 2025. So, investing in real estate in India is a great idea.
NRI investments in India are the most talked about but least understood topic. It is since the rules are just far too complicated. It also applies to the paperwork required to close a real estate transaction. So, if you are NRI planning to do real estate investments in your home country, you must be aware of the documents required to close the transaction.
Fractional ownership is a paradigm that has gained traction in several developed countries, including the United States, Singapore, and Hong Kong, and is now gaining traction in India.
There are a variety of investment options available to help an investor diversify their portfolio and decrease risk. Consider two options: Cryptocurrencies and fractional ownership in commercial real estate.
NRIs can buy and sell real estate in India. NRI investments in India get governed by the Reserve Bank of India and are subject to the Foreign Exchange Management Act (FEMA). As a result, there are investment rules and regulations for NRIs in Indian real estate that must get followed during such transactions.
Understanding the basics of REITs and Fractional Ownership, and knowing the differences and their suitability is important before taking the final decision of investing. Hence, to add to your knowledge, we bring you a detailed comparison of both and outline which investment is suitable for your investing goals.
Have you been thinking of investing in real estate lately? But, don’t know whether to invest in residential or commercial property for better returns? Maybe, let us first understand the difference between residential real estate tenants and commercial real estate tenants to better make an informed decision.
5 Inarguable Reasons To Swap Residential Real Estate Investments With Commercial Real Estate Investments
Real estate is the best form of investment due to the guaranteed, dependable, and infallible profits and higher returns. There are many ways to invest in real estate, of which the most prominent are residential real estate and commercial real estate.
FDI is not authorized in a company that is or intends to be in the real estate business, farmhouse building, or dealing in transferable development rights.
According to a report by Colliers and CRE Matrix, the leasing of office space or commercial office space by startups is expected to increase by 30% during 2022-24 across six cities.
Despite concerns about the Omicron crisis, the real estate market in 2022 appears to be positive, with demand growth across all categories.
Investors, both institutional and private, have gravitated into Commercial Real Estate (CRE) because to its high returns and investment portfolio diversification, which protects investments from market volatility.
Fractional ownership is a recent trend in the real estate market which is a new, feasible, and pocket-friendly way for commercial real estate investors!
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