Orchard 126 HIRA Registration No. - HIRA/P/NOR/2018/000236

Posted On July 22, 2019

Why investing in property is always a good decision

Why investing in property is always a good decision

 

Investing can be a baffling proposition and there’s no denying the fact that there are only a few handful that are actually masters in the field and have picked up the art of investing for profit. Out of thousand endless ways to earn money, investment in property is a great option to consider. However, when it comes to buying a property, people can be a bit sceptical to shell out their hard earned cash if they don’t plan on residing on the property that is in question for purchase. Here’s a look at five such perspective that makes investment in property a smart decision in 2019.

 

Defining income property

 

As the name suggests, income from property is all that you earn from it. In other words, it refers to any property brought or is developed with the sole intention of earning from it. Even residential apartments can be also treated as income properties beside commercial properties as well. Typically earning is generated by holding the property or renting it out to others. In broader perspective, one can also hold the property for a good amount of time, sometimes in years, before the value is raised and well enough to sell it off for good.

 

When you have made up your mind to invest in an income property, you are already one step closer to becoming your own boss. Starting from choosing your own property to invest in, you decide the rent charges and what all is needed to manage and keep your property in the best condition. Think about it. In any average job, you are bogged down by company rules and guidelines. Now, investing in stocks does offer some mental peace but investment in property is where the real game lies, as this is one such place here you control your own money.

 

Appreciation of your property

 

Perhaps one of the delightful things about investing in real estate is how you can buy it for a small amount of money from your own side while the rest can be offered by a lender, often a bank, in form of a loan. This can be referred to as a High Leverage where when you purchase something that is way more debt compared to equity. Let’s illustrate this with an example.

 

You can invest 1, 00000/- of your own money and borrow another 9, 00000/- from bank. Now, with both these amount, one can buy an asset that’s worth 10, 00000/-. Now, for over a period of 10 years, the investment from property will be appreciated by at least 5 percent more. Here is how the leverage is going to offer a rewarding benefit as the appreciation will not be on your one lakh but the entire ten lakh that you procured earlier to purchase the property. Imagine what your property worth will be after 10 years!

 

Earn by renting out your property

 

Typically, people buy a property for their own living needs. However, there’s one more angle to explore where the investment in property can be solely done for renting needs. If you plan on renting your purchased property, you will be able to receive a monthly income which can also cover your maintenance expenses and whatever is left can be turned to your savings account for good.

 

Because your tenants can take care of your mortgage

 

Normally, any fixed rate mortgages attracts interest for over 30 years and carry an interest rate that remains almost the same for the entire tenure. Now, when you are just starting out, one has to pay a significantly higher amount of interest. However, at the close of the 14th or 15th year, it will be a half split. Hence, the longer you will be holding your property, the more of the loan principal your tenant will be paying for you. In other words, you will be generating more wealth for yourself. Every single year that passes by and you continue to hold a property, residential or otherwise, you will be actually using what your tenants will be paying to clear off the debt. In other words, you will be significantly reducing the loan amount which in turn shall help you build your wealth and eventually grant you access to either go forward with refinancing the loan or sell off the property for a massive profit altogether.

 

Tax Benefits like never before

 

When you are out renting your property for good, you will be entitled to a string of tax benefits like nowhere else. Furthermore, you can work towards the following to your benefit:

 

  • Reduce Interest on mortgage.
  • Any interest on your credit card to make a purchase related to your property
  • Insurance needs
  • Expenses towards maintenance and repairs
  • Travel related expenses
  • Professional or legal fees paid
  • Property Taxes and much more

 

Apart from all these, you also get to enjoy depreciation from government on your property purchase price based on pre-set schedule. This applies even if your purchased property is appreciation in terms of its value. If you had procured a massive sum by working a regular 9-5 job or by investing in stock market, you would still incur a significant loss due to fluctuating market. Comparatively, when you own a property for rental needs, you stand a chance to offset any income pitted against the depreciation expense which in turn significantly eliminates your taxes altogether.

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