Sooner or later, most of us concluded that in order to survive in today’s swiftly developing world and to secure our future, we need to diversify our sources of income, that is, having multiple sources of income is better than having a single major source of income. Also, putting your income from salary or profits from business in the savings account is not a good idea to get good returns, fixed deposits and other schemes also don’t make a big difference.
Putting money in real estate is considered to be a time-tested method of investment even though it doesn’t look so cool to many people. It is a sure shot way to build up wealth with time and the best measure to fight inflation; it actually multiplies your money in long-term. Let me present you few reasons why investing in real estate are a better option:
- Generating Passive Income: Let us first understand what active and passive income is. Active income is that income for which your presence or active participation is required, for example, a job, a small business, etc. Whereas passive income is that income for which your physical presence is not needed, still you generate money from that source. You can check the Roi’s List application if you want to start Investing.
Investing in a property which you can put on a lease can create a passive source of income for you. Rental income can help you getting ongoing cash flow enabling you to utilize your active time in other sources of generating income. Real estate assets are a predictable, visible and stable source of secondary income. Also, you can start your own business in your owned space without needing to pay anything to anyone; this can save you lots of money and can help reduce pressure on you.
- Income Tax Savings: Government provides benefits to real estate owners by giving them income tax benefits in form of rebates and relatively lesser tax rates on long-term returns from property. Let me ask you a question, if two persons are earning INR 10 lakh per annum, one from his own business and other from renting out his property, then who you think is keeping more money by the end of the financial year? That’s absolutely correct, the second person who is earning from renting out his real estate.
- Easy Repayment of Mortgage: Let us suppose you bought a real estate property using mortgage or loan and then you rented out this property to someone. Now you can repay your mortgage through your rental income; your tenant is, in fact, paying your loan amount thus making you rich day by day. A rental property is kind of a high return savings account in which you are not depositing any money but still, it is growing automatically from rental income.
After the end of the term of your loan, you can sell this property and get a favourable amount in one go or can continue leasing out the property to get regular income. Isn’t it a win-win deal?
- Real Estate Cost Appreciation: It’s been observed since a long time that the value of real estate generally goes up with time and by the time you end up re-paying your mortgage, your property may give you multiple times returns. Sometimes time is not favourable for you, the recession happens, real estate values may fluctuate or you buy at the wrong market timing. However, with the passage of time, real estate value goes up and up considering all the negative factors. If you buy a property today then 30 years down the lane, the whole thing will be worth much greater than what you are expending for it at present.
- Protection from Inflation: Inflation can be defined as persistent augmentation in the price level of commodities and services over a period of time. When the price index raises, currency can buy lesser commodities and services; therefore, inflation signifies a declination in the buying power of people.
Though a majority of the people fear inflation, as a real estate owner, you may not worry about it as you will be beating rate of inflation with the rate of returns from the owned property. As inflation pushes the living cost higher and higher, the flow of cash from the rental property will increase with time.
- Better Control over Destiny: Most of the intelligent people choose real estate as an investment option and a diversified source of income because they don’t believe in tying their destiny in the hands of a few people such as CEO of their company, Stock exchange advisor, etc.
- To get a better real estate deal, I need to push myself to find it.
- If there is more competition in the rental marketplace, I can increase my cost of advertising to compensate it.
- If the value of rental income drops, I can choose to enhance my asset to restore its value or to wait for some time.
In simpler words, I have control over my financial destiny and the market situation with my own hands.