Is real estate worth your money?

The current real estate investing system produces a situation in which real estate catapults the available money supply in the system. This enhanced money supply is then channeled back into the real estate market. The never-ending back-and-forth between broker and real estate investor has resulted in a growing real estate pricing environment.

These growing prices are frequently a real estate bubble since the fundamentals of the economy, such as income levels, remain unchanged. This bubble bursts, causing prices to stabilize for a brief time. Real estate investments, on the other hand, end up propping up the money supply, in the long run, owing to the nature of the process, producing a self-enforcing and amplifying cycle.

In theory, Long term holding of real-estate property never disappointed investors. The key is finding a good property and finalizing the deal is the main pain that everyone goes through, which is where the investors tend to invest in properties that are ready. Finding a good property takes time, money, and effort but in the long run, the investor also learns and is satisfied with their own investment rather than investing with the developer.

How to determine what type of property you should invest in?
When you identify a motivated seller, the following step is to assess your strategy for this property. Before purchasing real estate, you should develop a credible plan and set goals. There’s no shortage of properties.

One important thing is don’t go with what is available in the market, instead develop a plan on what you’re planning to invest. 

• Do I want to invest in Land, Residential or Commercial
• What is the exit strategy?
• I’m investing and staying focused on my goal?
  • Generally, investors tend to what is available in the market instead of focusing on the goal.

What the perfect first deal is for you and what deals you should never do to start with?
Finding a real estate investment deal is hard, but finding a good real estate investment deal is even harder. The right one will be based on smart choices made upfront, which will dictate your financial success down the road. Real estate entrepreneurs need to know what they’re looking for when searching for investment properties.

In order to utilize the real estate slump to their advantage, and generate real estate leads, investors should have a clear vision of what they want and set a goal. This will serve as the framework for the investment — what you’re seeking, what you can financially obtain, and how much of a return you’re hoping to get each year.

• Land – If one is investing in land property, the main focus should be long-term to see the results and geographically within city limits. In my experience, the initial dream is big but to achieve there’re a lot more parameters the basic principles are :
  • The key is a long-term holding land property within city limits and maintaining it.
  • The focus should be long-term to see the results and geographically within city limits.
• Residential – Your first aim should be to determine if the property you intend to invest in will generate positive cash flows.
  • The cash flow is determined by a variety of circumstances, including the health of the local rental market, the amount of borrowing, and the interest rate you will pay.
  • Also, compare the cash flow potential of certain properties to that of other homes you have considered for purchase.
• Commercial – Commercial real estate is tricky, To start with it’s a good idea not to invest in small units until you understand the real estate market.
  • The numbers show very excitingly but the reality will be different. [The details will be shared in a different article.]

Cash flow is important in any real estate investment, How to ensure positive cash flow in all economies?
Cash flow refers to how much money is left after expenses. Positive cash flow is key to a good rate of return on an investment property.

• Expected cash flow from rental income (inflation favors landlords for rental income)
• An expected increase in intrinsic value due to long-term price appreciation.
• Benefits of depreciation (and available tax benefits)
• Cost-benefit analysis of renovation before sale to get a better price
• Cost-benefit analysis of mortgaged loans vs. value appreciation

Cash flow in real estate, in the simplest terms, is the net difference between money coming in and money going out from your rental property. Positive cash flow is the ideal circumstance, wherein income exceeds expenses, leading to a profit for the investor.

Maintaining positive cash flow is one of the most common ways of making money in real estate. Many real estate investors go for positive cash flow properties since they provide a consistent income which takes effect very quickly after acquiring the property. Achieving positive cash flow from your rental property is one of the main ways in which you can take on investing as a full-time job.

Pre-sales of Property before Construction in India

A pre-sale property usually comes with a tempting price that is lower than the market price and entices you only on that basis; nevertheless, you should only buy it if it is an investment for your future and you know who the builder is. Pre-sale properties are only profitable if the promoters’ track records are solid and proved – never otherwise.

Presale agreements have become a common practice for home transactions across the world, particularly in several Asian markets.

Although there is a growing empirical literature on presales agreements, just a few studies examine its theoretical roots. There is a market for a collection of interconnected theoretical models that explain how and why developers and customers enter into presale contracts for unfinished residential projects. Given divergent consumer views about future market pricing, developers and purchasers enter into presale agreements to avoid two interconnected, basic risks:

1. Real estate market valuation and
2. Default

Presales need a committed team of professionals, with typically two-thirds committed to technical activities (creating solutions to client issues) and one-third dedicated to commercial operations (managing deal qualification and bid). These initiatives have a two to three times greater impact on revenue development than lead generation.

Boosting the presales engine may result in a five-point increase in conversion rates;

1. A 6–13 percent increase in income, and
2. A 10–20 percent increase in the pace with which prospects move through the sales process.

On new construction, federal tax is needed and must be paid at the time of completion. If appropriate, the buyer’s lawyer will submit the GST rebate on behalf of the buyer. In other cases, the developer would charge the rebate amount on the GST and then wait for the rebate from the government.

Real Estate Market Fluctuation: The market fluctuates back and forth. Regardless of market conditions, purchasers must finish on the property. Real estate is a long-term investment, but be prepared to hold the home as a rental or move in.

Mortgage Approval: A mortgage cannot be given until the project is completed. As a result, lenders might give a pre-approval when acquiring a presale. However, another examination will be required upon completion to assure lending for the house. If the property is worth less than the purchase price at the time of completion, the purchaser may be obligated to make up the difference.

Purchasing off a floor plan: Purchasing pre-sale necessitates vision. During building, the floor layout may be altered. The developer will include a minor deviation tolerance in the Contract of Purchase and Sale and Disclosure Statement. Having a realtor represent you in the purchase from the developer can help you determine what variations in finishing and square footage may apply. It is critical to buy from a respected developer to assure a high-quality product.

Understanding Pre-sale:

A prevalent myth is that pre-construction properties are less expensive than new construction properties since you are buying on spec and must wait until the house is completed before moving in.

• Presale homes are actually more costly than resale ones. As of the fourth quarter of 2018, the price of a Presale house in Greater Vancouver was around 25-30% more than the price of a Resale property in the same neighborhood. Presales are often constructed by major developers with substantial funds. Their business is real estate, and they employ skilled negotiators, economists, and salespeople.
• Resale properties are often sold by members of the general public who lack the same resources as developers and have distinct conditions and reasons for desiring to sell. Presale projects are frequently delayed, despite the fact that it is not usually the developer’s responsibility. Due to extensive delays for building permissions, a shortage of trained labor, and other unanticipated obstacles, projects frequently run late (6mths – 12mths).
• Rates are often locked in by banks for 90-120 days. If you buy resale, your costs will be predictable. Because your mortgage will not be obtained until the home is constructed, you are vulnerable to interest rate rises with Presale. When you get an appraisal done on a constructed property, you instantly know the appraisal value. When it comes to a presale property, the appraisal is completed when the building is finished. You must verify that you have accurately assessed the value, otherwise, you will be required to make up any difference between the value of the building and the value of your mortgage. People that buy Presale Properties profit from the price increases, which is not always assured.

Consumer Risks in Buying Presales: Typically, developers engage in contracts that demand apartments to be developed within two years at a specified price and require prospective buyers to pay deposits. Purchasing a “presale” is not the acquisition of an existing physical property, but rather a contract for the right to receive, and the duty to pay for, a finished unit at a later date. This distinction implies that there are difficulties you should be aware of before making an educated decision to purchase a unit in a new development.

A variety of events might occur between the initial presale contract signing and the project completion date that can affect a buyer’s ability to finance their purchase. For example, the cost of the development unit might rise, financing rates could rise, property values could fall, and a buyer’s job position could change. All in all, it’s a fantastic idea to buy pre-sales if you’re living in the area, but if you’re just looking to invest, I’d reconsider.

The reality of Buying Land in Acres vs other real estates in India

Real estate has been ranked as one of the top three major investment opportunities for Indians. Among the different property types accessible, the land is by far the most popular. It has consistently remained a perfect alternative for the investor community, owing to a higher Return on Investment (ROI), higher resale value, and cheaper maintenance cost. However, experts advise conducting a thorough review before taking the leap.

One of the most significant advantages of purchasing land is the ability to customize it for any future use. It may be used for poultry farming, agriculture, or building a house.

“An investor can sell the land to a developer for construction of residential or commercial developments. Or can enter into a joint venture agreement with a real estate developer under RERA. Not only does the investor gets an exit route but also attains his share of profit in the form of a newly constructed unit.”

– Niranjan Hiranandani.

Land appreciates at a faster rate than constructed properties because it remains in the same condition, barring natural impacts such as weather or erosion.

Furthermore, a limited supply of land ensures increased market competition, resulting in higher price points.

The cost of maintaining a plot is typically lower than the cost of maintaining a built property.

• You won’t have to worry about recurring repairs or upgrades. Plots require no additional maintenance other than mowing the area, fencing, and hiring a guard for surveillance.
• RERA has resulted in a significant shift in real estate norms and regulations. It not only makes it more difficult for realtors to follow the new rules, but it also increases transparency and accountability.
• The Union and state governments are digitizing old maps and land records in a massive effort. This is good for land investments because it will bring more transparency and clarity.
• Purchasing raw land is no longer a difficult task.

Rural property is available throughout India. The average cost of land is low, especially if purchased wisely from a reputable source. Is it, however, advantageous to purchase vacant land in order to build a house or sell it later? Do you think raw land is a good investment?

There are numerous advantages to owning land.

For starters, owning land can yield excellent returns. In general, the land is regarded as a long-term asset that is tangible, usable, and in short supply. Because land is in short supply, long-term trends indicate that it will continue to appreciate over time. The location is important, but the price is even more so. The land is the most undervalued real estate investment option, and it is sometimes even thought to be pointless. Land, unlike other investments such as stocks and commodities, is always in demand.

Affordable and Long-Term Investment:
You can acquire land without burning a hole in your pocket if you have a precise plan and clear objectives. Costs are low once you own the property. There is no denying that investing in land entails some risks and drawbacks. Still, by taking the right actions at the right time, the landowner can avoid these risks and reap the benefits.

Profits with a Buy and Hold Strategy:

In today’s electronic environment, it is much easier to purchase land and have better prices. When you purchase land at a good price, with low maintenance costs, you can wait for the right time to sell or develop the land. Your land will appreciate in value over time, allowing you to get the best price for it.

Vacant Land Minimum Work:

• Land ownership provides financial security and contentment to the owner. It has been in high demand because it can generate passive income, provide earning opportunities, and allow investors to double their money without taking on significant risks. Furthermore, it is a limited resource that can help you improve your investment portfolio. You will profit and grow as an investor if you invest in land with a well-planned strategy.
• Precise land investment can yield excellent returns if you are aware of the risks and pitfalls. The land retains its value over time, increases in value, and provides the owner with a sense of security. These are some important reasons why purchasing land is a good investment and can help you grow as a real estate investor more quickly.

Land ownership can provide you with everything you need, whether you need financial security, want to double your money, generate passive income, or invest in real estate. You can keep it for years to let it appreciate because there is no risk of damage or theft. Landowners are not subject to depreciation or theft, and they have numerous opportunities to profit from their land. Overall, it is a limited resource in which to invest money in order to build wealth.

Investments that NRI should aim in India

NRIs frequently invest in real estate throughout the world, since it is seen to provide long-term value and serve as a platform for starting a business in that location. NRIs in India 2022 are seeking the best NRI investment opportunities. Before making a decision, NRIs should carefully consider their objectives and risk profile. Similarly, investment mechanisms such as mutual funds, stock markets, NRE deposits, and others have limitations. Their laws and regulations are always changing, so keeping a careful eye on them is necessary to minimize losses such as excessive taxes, lock-in periods, and so on.

As a result, NEI investment alternatives are determined by an NRI’s investing goals, risk tolerance, and expected returns. The ideal scenario is to build a portfolio with several asset classes that complement each other and help you achieve your objectives.

Having to pay more to close an intereted propery is a good sign rather than wating.

Guidelines for a Beneficial Investment:

The real estate market has been on a steady rise; nevertheless, there are certain guidelines to follow in order to make it a beneficial investment.

• Real estate investing is only beneficial if done over a lengthy period of time.
• There are different restrictions for NRIs investing in real estate in different countries. In India, for example, when purchasing an immovable asset from an NRI, the buyer is required to deduct TDS and deposit it with the government.

Role of REITs:

Real Estate Investment Trusts (REITs) give part ownership of a rent-yielding, high-quality commercial property to investors wishing to get exposure to the real estate market without committing a large sum of money. There is no minimum investment size or term commitment, and there is simple liquidity. REITs are required to distribute 90% of their profits to shareholders in the form of dividends. For investors, the dividend serves as a steady source of income.

Real Estate investments aimed at NRIs:

There are several forthcoming real estate developments that are aimed at NRIs and guarantee a high rate of return on investment.

Property investing is one of the most popular NRI investments in India.

• It is a fantastic long-term investment with consistent growth (provided the property is in the right location). Make sure you use the right sort of bank account when buying and selling a home. The account’s regulations will decide how much money you’ll be able to convert back to dollars in the end.
• You can invest in both residential and commercial real estate as an NRI. When it comes to agriculture fields, plantations, and farm buildings, your options are limited. You can only receive them as gifts or inherited assets; direct investments are not permitted. You must be extremely cautious when it comes to legal papers since there are several constraints when it comes to repatriation.

In the case of a property transaction, the buyer deducts a tax at the source of 20% for NRIs. Short-term capital gains are taxed at 30%, whereas long-term capital gains are taxed at 20%. NRIs, on the other hand, are entitled to claim long-term capital gain exemptions under sections 54 (investment in another property in India to the number of proceeds) and 54EC (if proceeds are invested in certain bonds). An NRI’s decision to invest in real estate is aided by the TDS and incidental capital gains tax.