How To Build Wealth Through Real Estate?
Real Estate is known as one of the best investment avenues to accumulate wealth. If you are thinking of investing in real estate, then it is important to understand the different ways in which real estate can help build wealth. As an investor, it is important to ensure that you choose investments that are in sync with your risk tolerance and financial goals. To make these decisions, it is imperative to understand various investment avenues available to you. In this article, we will talk about real estate as an investment asset and discuss various ways in which you can build wealth through real estate.
AN INCREASE IN THE VALUE OF THE PROPERTY
One of the most common ways in which investors build wealth from real estate is when the value of the property rises. In simple terms, this means that if you buy a property for Rs.50 lakhs and its value increases to Rs.60 lakhs, then you can book a profit of Rs.10 lakhs by selling it. The beauty of investing in real estate is that it appreciates in value over time. There are various other factors that result in the appreciation of property value over time like:
Whether you are looking at a commercial or residential property, location can play a huge role in price appreciation. If the location is well-connected to major hubs of the city and is centrally located, then you will stand a better chance to get a good sale price or rent from the property. It is important to remember that since land is finite, locations that are centrally located and well-connected tend to have higher prices than others.
The neighborhood plays an important role in determining the demand for a property. Some aspects that you should look for in a good neighborhood are appearance, amenities, and accessibility. While the definition of amenities and appearance can be different for residential and commercial properties, it is important to ensure that you keep these factors in mind before buying the property.
Every area goes through developments in civic infrastructure to improve the quality of life. However, these developments can be problematic for some buildings. For example, if the civic authorities have planned to build a government hospital in the area, then the traffic and noise around the hospital will increase. You need to assess if this can negatively affect property prices before making the purchase.
Once you have purchased a property, the improvements that you make can have a direct impact on its value. If you remodel the house/office and make it more desirable to prospective buyers, then you stand a better chance of getting a higher selling price.
Don’t forget inflation…
As a general rule, it is important to remember that housing prices tend to increase with rising inflation rates. However, it is important to remember that while you might get higher rates due to inflation, the prices of other goods would have increased too. Therefore, you should not bank on inflation for getting a higher selling price.
REGULAR INCOME FROM THE PROPERTY
Apart from an increase in the price of the property, you can also generate a regular source of income from your real estate investment. Here are some ways in which real estate can offer regular income:
Income from land
If you have complete rights to the land, then there are many ways in which you can earn regular income from it like payments received from access roads, cell towers, pipelines, etc. You can also rent the land for agricultural production or factories.
One of the biggest sources of income from investing in a residential or commercial property is rent. Depending on the location, you can get a reasonable sum as monthly rent from the property purchased by you.
WHAT CAN YOU DO?
When you decide to invest in real estate (commercial or residential), here are some things that you can do to generate wealth:
01. Buy a residential or commercial property with a horizon of 7+ years. During this time, rent out the property. This will ensure that you earn regular income as the property appreciates in value.
02. Flip the property. This is a relatively uncommon practice in India where you buy a property, fix it up and make it a better version, and sell it at a higher price within a short time. This is recommended for people who have a knack for creating amazing living or office spaces and can identify a ‘fixable’ property effectively.
03. Create a vacation home for short-mid-term travelers. This segment has started evolving after the pandemic where people are traveling to different cities and countries, renting homes, and living there for a few weeks or months. You can create a self-contained unit and offer the home as a vacation rental.
As you can see, there are many ways to build wealth through real estate. However, one thing that is paramount to succeeding as a real estate investor is ensuring that you buy the property after due diligence. Being a developing country, there are many developers offering excellent structures in the commercial and residential sectors. While cities like Mumbai and Delhi don’t have many open spaces left, cities like Pune are evolving as a preferred real estate destination. In Pune, BramhaCorp is leading the real estate boom with projects like BramhaCorp Smart and The Collection in the residential segment, and BramhaCorp Business Park, Boulevard Towers, and Vantage Tower in the commercial segment.
Before you buy a real estate property, make sure that you consider all aspects and follow the tips mentioned above to build wealth with ease. Good Luck!