Real estate investing has given mind-boggling returns over last 10
years. However one should be careful while investing in real estate. Here are some useful tips that can help
you be a sane investor in real-estate.
There are certain rules applicable to everything we do in our
daily lives. The whole idea behind this belief is to fetch the maximal
benefits, along with guarding ourselves from any kind of associated risks.
In that respect, our personal finance management is not distinct
either. A number of aspects in our everyday financial matters involving loans,
investments, taxes, credit cards, etc. are directed by some definite rules. Let
us learn about some prohibitions that is, things we must not do while investing
into real estate.
1. Say NO to very frequent
switches in properties:
People tend to sometimes trade with the real estate investments.
Rather than retaining property after purchase, people buy/sell them too often.
This high frequency of trading can prove to be worthless. Wondering how? There
are no tax benefits retrieved whenever property is sold in a short period of
time.
If a property is sold within 3 years of purchase, the gain is
treated as short term capital gain and there is no tax concession or exepmtion.
If you sell a property after 3 years, it becomes long term capital gain and
will be taxed at a lower rate. Even this concessional lower rate, can be
withdrawn on long term capital gains from the property if these property
transactions are happening too frequently.
If it happens very frequently, the Income Tax officer may treat
this as a business income.
2. Do not invest into an
unfinished property:
Delay in the complete construction of property is an instance that
is too common to happen and is seen often. Postponing the property’s date of
completion has become an industry norm that keeps repeating on a frequent basis.
Sometimes, extended delays can even result into postponed or
incomplete projects. You cannot afford to put your savings of a lifetime at a
serious risk, by overlooking this harsh fact. A long delay in property
completion may even put you under the dual strain of rent and EMI. Also, the
tax benefits available on real estate investments become restrained with time,
in cases of extremely delayed possession. Considering this, purchasing a
completed property will prove to a wise decision.
3. Do not broaden your budget too
much:
Property purchase can cost you a lot, really a lot. It involves
not only putting in all the money saved till date as down payment, but also
paying a huge portion of our income as monthly EMI for years to come. This can
jeopardize many of our other serious and important commitments such as, a
medical emergency or children’s higher education, not to forget our daily
expenses and small luxuries.
4. Avoid too much investment in
real estate:
Most of us are big fans of property, gold, or big bank deposits.
We generally overlook asset classes such as bond funds and equities. Also we
have many misconceptions about investments in property. Here is one - property
prices increase at a much faster rate compared to gold and other financial assets.
This belief is one reason why most people end up investing entirely, or
corpulent sums in property. This leads to negligible amount of money invested
in other investment assets.
Transaction costs involved into property are comparably much
higher. It is an asset that canneither be converted into cash in a single day,
nor can it be sold into multiple parts. With these constraints in mind, one
should think twice before locking all their money into property.
Because of its illiquid nature, it is not advisable to invest more
than 30% of your assets in real estate.
5. Don’t jump into real estate
investment before seeing your big picture
What generally investor considers before investing in a property?
Their repaying capacity, loan eligibility and property details… Is this enough?
This may not be enough. Because of this additional property
investment, your money is getting locked. To service this loan, your retirement
may get postponed by a few years. Therefore before taking real estate
investment decision it is better to consider your big picture in the form of a
comprehensive financial plan. That will hep you take a right investment
decision.
Not doing the above mistakes can help you become a better and
profitable investor.
Other info? visit Westhill Consulting British Colombia
website. We offers a wide variety of innovative housing styles and options.
Like us on Westhill Consulting British Colombia facebook
page for more updates.
No comments:
Post a Comment