A real estate investment is made successful by the interplay of many factors. While the location is truly a major component in making the investment possible, it is not the only one.
Real estate investing is invariably one of the best options to park your money for a long or short period of time. The regular and definite asset appreciation, low risks, and tangible nature of the property make it a great investment.
What exactly is real estate investment?
Real estate investment is the process that involves the purchase, rental, management, ownership, or sale of a real estate property to generate an income. There are many different types of real estate investments, but the majority fall into two categories: Physical real estate investments such as land, residential and commercial properties, as well as other modes of investing that do not require physical property ownership, such as REITs and crowdfunding platforms, are examples of physical real estate investments. Residential real estate includes almost any place where people live or stay, including single-family homes, condos, and vacation homes. Residential real estate investors make money by collecting rent (or regular payments for short-term rentals) from tenants, or by the appreciation in the value of their property between the time they buy it and the time they sell it. Residential real estate investing can take many forms. It can be as simple as renting out a spare room or as complex as purchasing and reselling a house for a profit.
A commercial real estate space is one that a company rents or leases. Commercial real estate includes an office building rented by a single business, a gas station, a strip mall with several unique businesses, and leased restaurants. Unless the company owns the property, each company would pay rent to the property owner. Commercial properties typically have longer leases and can command higher rents than residential properties, which can result in higher and more consistent long-term income for a property owner.
What is the scenario of Real Estate Investment In India?
Real estate investment is one of the most secure investment options in India. Characterized by appreciation in its property value, and a growing number of MNCs and international companies setting up their bases in India, real estate value is appreciating and is expected to appreciate at a greater rate in the future, making it a great investment option in India.
The latest real estate trends in India have shown that residential real estate in Mumbai and commercial real estate investment in Bangalore has hit a new high within the past ten years.
Housing real estate has become one of the most wanted assets in post-pandemic India, especially in Mumbai. Real estate investments in Bangalore and Hyderabad have been considered great for commercial real estate. But the investment can only be beneficial when you access it through the right platform or invest in a good market.
How to select the right market for your real estate investments?
Some factors that play an important role in determining the value of a market and making it a profitable investment are
- Regulatory Factors
Some real estate markets are more investor-friendly than others, these can be differentiated on the basis of taxes charged and landlord/tenancy laws.
It really pays to understand the following factors
- Property Tax Rates
Tax rates depend on the government, locality and festive seasons. While in times of inflation, the prices can go really up, the tax rates can also go down during festive seasons.
- Property Insurance rates
The insurance rates also vary depending on the locality, neighborhood, and susceptibility to natural disasters or any other damages.
- Municipal Landlord Taxes
These taxes are paid by the landlord. Each landlord falls in one of the three categories: either they don’t earn enough to pay tax (rental income), you pay tax on a 20%rate, or a third category where you pay 40% tax.
- Local landlord/tenant laws
Tenant/landlord laws can vary from one area to another, the laws give rights to tenants and landlords to help come to an agreement which is beneficial for both sides.
- Economic Factors
A locality going through economic decline will not make an ideal investment. Therefore economic health of a locality is also essential to be considered. An expanding population makes the locality a good prospective investment. Similarly, the availability of jobs and newer opportunities, wage rates also help understand the economy.
- Real Estate Factors
These usually focus on understanding the market from an investment point of view
- Rental to owner occupancy ratio -If a locality has more rented properties, then it will easily make a better investment for landlords.
- Vacancy rates in the market at the time of purchase – Time plays a very critical role here. Even a low-priced property is no good if you have no one to rent it to.
- Housing sale statistics – Buying a property at a decent rate is one thing, but being able to sell it off easily can be understood by a detailed study of the market and housing sale statistics.
- Local Market Factors
After going through all the factors mentioned above, it becomes essential to also evaluate these factors on a local level. You might want to look at the quality of the neighborhood, safety, schools, and their quality, transportation, access to amenities, proximity to shops, and nearest places of employment and shopping.
In conclusion, following the above-mentioned points can make your investment fairly easier. While most investors find local properties more profitable, one can also invest in real estate remotely and never have to worry about asset management, whether it is through Fractional Ownership platforms or trying Real Estate Crowdfunding.
Assetmonk is a real estate investment platform that offers high-end CRE (Commercial Real Estate) investment deals in the form of fractional property or crowdfunding models. The company offers an IRR of up to 21%.
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