The real estate market has exploded in the post-pandemic era. The corporate market is increasing, increasing demand for commercial space and rental residences. According to industry statistics, in the second quarter of this year, Indian rental home searches climbed 84.4% year on year and 29.4% sequentially. Furthermore, total combined rental housing listings rose 3% quarter on quarter and 28.1% year on year throughout the 13 Indian cities covered. Do not miss The 18% GST on rent gets anticipated to harm the rental housing industry. But, what are the variables that will lead to the rental housing demand boom? Accessibility and cost-effectiveness: When it comes to renting a property, people primarily examine three factors: infrastructure, connection, and price. The property’s location, with ready infrastructure and decent connection, takes precedence over the size and price of the unit. Customers want a home in a prominent location that allows them to maintain a good work-life balance, with less commuting time, easier access to…
How To Fix A Bad Retirement Plan With Quality Investments
A good retirement plan will be our walking stick in the golden years.
You dutifully put money down for your golden years. That is fantastic. But, more than likely, you have only a hazy sense of what you want rather than a detailed strategy.
Now that is terrible news! It only implies you are to make a lot of blunders on your way to a pleasant retirement.
Many of us believe that whatever we save throughout our working years will be adequate for our retirement years. However, have you taken into consideration the devil known as inflation? Inflation that eats away at the worth of our money 24 hours a day, seven days a week? Almost certainly not. So, this implies we would not be able to maintain the current lifestyle in our later years since we would not have saved enough.
So what contributes to a bad retirement plan?
With individuals lasting 20-25 years beyond retirement, if not more, it is critical to ensure that our finances are in excellent form when we retire. As a result, we will go through the most typical blunders people make while saving and investing for their post-retirement lives.
- A late start: The financial goals of most people frequently include retirement at the bottom of the list. When people are nearing the conclusion of their working lives, they begin saving and investing for a retirement plan. So, they instead focus on intermediate objectives like buying a car or a house in the next 10 years. They overlook retirement planning because it is a long way off. It is a bad strategy.
- Inflation: Inflation wreaks havoc on those who pay no attention to it. Retirement planning is a long-term goal and, inflation majorly impacts financial goals. It has a significant impact on purchasing power. For instance, with a 7% annual inflation rate, Rs 1,000,000 of today will be worth Rs 13,000 in 30 years. As a result, items will get more expensive and, one will be able to buy far less with the same amount of money in years to come.
- Withdrawal of the EPF Money: A lot of people would cash out their provident fund account. It is incorrect because mechanisms like the Employee Provident Fund, or EPF, were created to guarantee financial stability after retirement. These are especially important for retirement planning because they are tax-free.
- Delay of Health Insurance: Medical costs climb as a person gets older. Most do not purchase health policies since they are insured by their employers. However, it is incorrect since most businesses only provide coverage when you work with them.
- No Emergency or Contingency Fund: One of the most typical mistakes while saving and investing for post-retirement is having no emergency funds. They would use instead use their long-term investments to meet emergencies. Failure to build a high-level emergency fund would only force the use of long-term investments to meet medical emergencies.
- Failure to save enough for early retirement: People are being burnt out at a younger age because of stress, prompting many to consider retiring early. Thus, people need to prepare well for early retirement to achieve objectives.
How to fix a bad retirement plan through real estate investments?
As we have seen these typical blunders made by most while saving and investing for their retirement plan, it is necessary to fix it with quality investments. And what better way than through real estate investments?
Real estate frequently outperforms other asset classes and is less volatile than other investment alternatives. It can be another asset type for income in retirement if the individual has sufficient liquid and consistent income-producing financial assets.
Furthermore, rental income from real estate property is an inflation-adjusted source of income. Also, the income is predictable in advance, making it easier to plan and use.
Real estate investing is the acquisition or selling of land and buildings for profit, and there are a variety of ways to enter into the sector. Commercial Real Estate (CRE) comprises office buildings, retail stores, and any other structure utilized for lucrative and commercial uses. These properties are more costly than residential ones.
But what if the cost of these assets is too high for an average Joe to invest? An average Joe can now easily invest in real estate and CRE for retirement plans through modern-day investment strategies like crowdfunding and fractional ownership.
- REITs: A real estate investment trust (REIT) is a firm that invests in income-producing real estate. REITs are similar to mutual funds. However, the only difference is instead of stocks and bonds, REITs hold commercial, residential, or industrial property or mortgage securities. So, REITs investors would receive rental revenue, profits from sold homes, or payments received on mortgage-backed securities loans. REITs also provide capital gains, but the regular dividend income is generally the draw. They avoid corporation taxation by redistributing at least 90% of earnings to owners. REITs (real estate investment trusts) have cemented their place in developed markets like the United States and the United Kingdom. However, this investment concept is still in its infancy in India.
- Commercial Real Estate (CRE) Investments: Commercial real estate investment is the most appealing investment strategy. It is because, regardless of market volatility, investment in commercial real estate yields a steady stream of cash flow and asset appreciation. It is opted by investors skilled in asset management and is not searching for a quick financial gain. Commercial real estate, once owned, may become an enormously successful and steady source of income for the foreseeable future. Commercial Grade Property Ownership comprises office spaces, warehouses, and factories. Due to the high quantities of money required, CRE has remained the realm of HNIs and Ultra HNIs. Thus, middle-income investors only have the option of investing in volatile equities or low-interest fixed deposits.
However, with new investment strategies like crowdfunding and fractional ownership, a middle-income investor can also invest in CRE.
- CRE Investments via Crowdfunding: Crowdfunding is the pooling of capital into a real estate project by a group of investors. Investors make money initially through rental revenue. CRE investing was only available to expert investors. However, these platforms have since broadened so that anybody may participate. Thus, crowdfunding has reduced the barrier to investing in CRE.
Also, crowdfunding allows investors to put their money into high-end commercial real estate developments without managing the property themselves. So an operator generally manages the crowdfunded property, and all an investor needs to do is spend their funds to support the project.
- CRE Investments via Fractional Ownership: BYOB (Bring Your Own Beer) is a popular concept among millennials, in which everyone contributes something to a party. So, in the same way, fractional ownership democratizes ownership of a high-value asset by allowing unrelated people to share passive ownership. Also, investors can then split the revenue and expenditures associated with this asset in proportion to their investment. Each investor owns a piece of the property. It is the best type of investment since all participants share the costs, profits, and financial obligations associated with the property. Fractional ownership makes investment in high-quality commercial real estate assets inexpensive. Indians may own commercial property according to their budgets thanks to this idea of real estate investments. In turn, this also helps to break the monopoly of HNIs in commercial real estate investment.
Therefore, these are the several quality investment options to fix a bad retirement plan. However, to ensure a well-balanced portfolio, meticulous planning is essential.
Assetmonk is a major WealthTech Platform in India, providing real estate investment options with IRRs of 14 to 21 percent in Bangalore, Chennai, and Hyderabad. Our products are divided into categories to accommodate different income levels. These categories are Growth, Growth Plus, and Yield. Click on the link above to visit the website.
How To Fix A Bad Retirement Plan With Quality Investments FAQ'S:
One needs to check whether one has set realistic performance goals and avoid selling or buying in a panic. One can also recognize the advantages of tax-loss harvesting and diversify the portfolio. One can also consult a financial advisor for further assistance.
One can bounce back from a bad investment by learning from that bad investment, prioritizing diversification, and rebalancing the portfolio.
Bad investments are called non-profitable investments.
One can protect his retirement savings from a crash by having a diversified retirement portfolio. It involves investing in mutual funds of stocks, bonds, real estate, and even cash. Rebalancing a portfolio is also another way to protect retirement savings.