Having your own house
provides a sense of security and an elevated social status. However, home
buyers have to tackle a long list of issues before committing to the
investment. If you are not careful, even a small mistake can put you in misery
for years or / leave your finances in a mess.
Real estate as an
investment can be very tricky if you do not know what you are doing, says Mr.
Suresh Sadagopan, Founder, Ladder 7 Financial Services.
WHY TO INVEST..?
As an investment,
real estate is like no other. It is simple to understand, tangible, and can
greatly enhance the returns of your portfolio.
The low volatility in
real estate prices lends stability to the investment. The prices rise gradually
over time, compared with other asset classes, which may see wide fluctuations.
It also provides a
steady stream of income through rentals, even during a lull in the economy.
Even if you do not intend to live in the house,you can partly finance your
mortgage payments & other expenses through the rental income. Besides, it
provides many tax benefits by allowing you to claim tax deduction on repayment
of principal & interest on the home loan, as well as repairs and
maintenance.
Most importantly, it
provides the much-needed diversification to your portfolio. But, keep in mind that there are different
considerations when you buy real estate for investment and for self use.
WHERE TO BEGIN..
Investing in real
estate isnt a cakewalk. Finding a good property with decent amenities in a good
neighbourhood, which is close to your place of work, school and markets is a
huge challenge. However, a little homework can help you zero in on a good deal.
You first need to
work out a budget to finance the down payment for the house & subsequent
EMI payments. Remember that you will have to meet the EMI obligation
month after month.While preparing the budget, do not forget to factor in the
expenses you are likely to incur after the purchase.
These expenses are
anything but ancillary. Painting, furnishing & maintenance expenses can amount to a huge
sum. Shopping for a housing loan is another aspect requiring homework for
first-time home buyers or / investors.Lenders will have marginal differences in
interest rate, processing fees, margin money required, prepayment options, etc.
Go through the fine
print carefully before signing on the dotted line. First-time buyers should opt
for a ready-for-possession property because there are too many hassles involved
in one that is under construction, advises Mr. Sadagopan.
Src: ET Wealth
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