Why invest in Real Estate?

With so many investment avenues available (and with Wall Street riding a multi-year bull market) it is a legitimate question. There are numerous places where you can invest your money with little or no involvement. Why should you put your investment dollars in something that will:

· Almost certainly take a good bit of your time.
· Force you, if you decide to rent the property, to deal with tenant problems.
· Leave you exposed to possible legal as well as financial troubles.
· Have no guarantee that after your time, money and effort is spent, that there will be a profit?
· Why then, Real Estate? It depends on whether or not your investment goals are long term or short term.


Long Term Investment

In the long term, historically Real Estate property has shown a consistent growth in value, even when some other investment choices were less stable. If there is an increase in value and you are paying down your mortgage balance, its pretty simple: Your increase your equity in the property and add to your net worth. The nice thing about it, if you have purchased the property right and maintained it properly, your tenants, in effect, make your payments for you! In addition, there may be tax advantages available to you when you deal in a long term Real Estate Investment. Although there are definite limits to these potential advantages, they can be substantial. Consult a tax or legal professional to see how your situation would be affected.

Short Term Investment

In the short term, Real Estate makes a great investment simply because the numbers are so large. It is not like buying a $200 watch and reselling it for $250. Yes, the return percentage will be high, but you still only made $50. With Real Estate, a decent rate of return can mean big profit dollars.

Investments Option

A recent report by the Chamber of Indian Industries pointed out that globally real estate is and should always be considered as an income-generating asset. Indeed, real estate is an attractive investment option, as it gives regular returns and also provides capital appreciation. This scenario is presently unfolding in India.

But, those days are gone with the crash of the housing market in the mid 1990s. The higher the rise in real estate prices, the steeper the fall. This was true, especially, in the metros, e.g. Mumbai and New Delhi. The supply increased enormously and the demand remained steady, as prices had gone beyond the realistic levels. This decline in prices stabilized towards the end of the decade as rates became more reasonable and affordable. In the meantime, the housing finance industry started to expand rapidly, making home loans easily available to everyone. Besides the housing loans boosting the market demand, the tax benefits provided by the last four consecutive budgets have also encouraged the end-users and investors alike.

Ensure that there is scope for infrastructure development around the property under consideration. Another factor is the location and the proximity to schools, hospitals, markets, public transportation, etc. Check out the rental returns and capital appreciation potential in the area where the property is located. Actual property taxes to be paid.