Investing in real estate can be a motivating source of income. Alongside allowing leverage at very low risk, it lends stability to your portfolio as well. You can enjoy several tax benefits that come along with investing. And access a steady monthly cash flow at the same time. And to top it all real estate entails the potential to deliver very high returns in the long run.
There are numerous advantages of early investments in real estate. Some of the best reasons why you should be investing in real estate include the following. Here is a broad list of why it is wise to invest in real estate at a younger age.
- Great Returns
- Passive Income
- Long-Term Security
- Tax Advantages
- Ability To Leverage Funds
- Protection Against Inflation
And don’t worry about the experience when you want to get into the real estate industry. It is much easier to get into the real estate industry than it appears to be.
How to Buy a House at a Young Age?
Buying a home early has specific advantages. One, you get to spend a major part of your working life free of rent woes. Another is that the house continues to provide great returns as an appreciating asset. So, take this opportunity to make it a great source of additional income alongside bringing down the burden of your loan EMI, if you plan to rent it out
These smart tips are worth keeping in mind when you are looking forward to investing in real estate.
Take a look at these few tips that you will find useful.
- Financial Discipline: It pays to be financially disciplined. Financial discipline is the cornerstone of making your dream home affordable. After all, you will need to pay the down payment on your house from your own pocket, which can be anywhere between 10% to 25% of the market value of the property you intend to buy. So start with cost-cutting and avoid wasteful spending to build your down payment fund. Clear your debts on time and maybe try to expand your income pool.
- Stick to the Budget: Beware as most of your monthly income goes on rent, groceries, dining out, shopping, and entertainment. It would therefore be prudent to categorize your expenses and determine how you are spending your money. Make a budget, and you don’t have to do anything manually in this digital age. Just compare your income to expenses and track how you spend your money. It will help you cut down on frivolous expenses and save for a down payment. You don’t have to change your lifestyle, just trim your expenses.
- Consider Investing: Don’t just save, start investing! Setting aside your excess income in a savings account will not fetch you the best returns. It would be sagacious if you consider investing in it. Your savings account will earn you a maximum interest of 4% per annum; a fixed deposit of 6% per annum; recurring deposit between 7% – 8% per annum before tax. Mutual funds offer between 10% and 15% or even more. But they are risky and affected by fluctuations in the market. Investing in your dream home will not only beat inflation in the long run. It can be a great advantage because what you are saving today is for a house tomorrow. Moreover, thanks to inflation the same house will cost more in the future. With fewer financial commitments it is better that you go for your dream home right away.
- Set Money Aside for Future EMIs: Buying a home without a home loan is almost impossible these days. It means that you will have to pay EMIs every month, and that is likely to be way more than the rent you are paying. Use an online EMI calculator to determine how much you will need to set aside each month for the repayment of your home loan. Start channelizing savings and investment returns every month even before you start repaying your EMIs. Better to learn how you’ll deal with your finances when the EMIs begin.
- Prepare for Other Expenses: There are many other out-of-pocket costs involved with home buying apart from the down payment. Like stamp duty, registration cost, memorandum of title deed charges, electricity connection, water supply, interior decoration, and more. Legal fees, brokerage fees, home insurance, etc. are also a part of the process. It will in fact be difficult to accurately factor in all the non-loan charges. Strategize accordingly and try to have at least an estimate of other expenses involved in acquiring your dream home.
- Improve Your Credit Score: A credit score above 750 will invariably make you eligible for a home loan. It will also increase your negotiating power for lower interest rates. Failing you actually will end up paying a lot more as interest, way more than the principal amount due to the long tenure of home loans. You could get a lower interest rate with a good credit score. Promptly paying your outstanding dues in full, not utilizing more than 30% of your credit card limit, not applying for too many credit products within a short period, and correcting credit report errors, if any will help you improve your credit score.
- Compare Home Loans: Compare home loans on third-party websites to narrow down options. Interest rates are usually pegged to the bank’s Marginal Cost of Funds Based Lending Rate (MCLR) when you choose a floating-rate loan. Consider other aspects as well, like processing fees, pre-closure charges, and late payment fees. Contrasting all the aspects of your home loan package will give you insight into the actual cost of borrowing.
Tax Benefits That Come Along with Real Estate Investing
While investing in real estate is the most preferred asset class for Indians and NRIs, buying a house at a young age has added advantages. Numerous tax benefits come along with investing in real estate.
Capital gains fall under two types of categories:
- Short-Term Capital Gain (STCG)
- Long-Term Capital Gain (LTCG)
The STCG category is applicable when the difference between buying and selling residential property is less than 24 months. Moreover, STCG describes taxes in terms of personal income tax.
Whereas, LTCG is valid for over 24 months and is taxed at a flat rate of 20%. Nevertheless, there are several limits and exemptions to the LTCG tax.
Leading Tax Benefits of Investing in Real Estate are –
- Indexation Benefit: These benefits take inflation into account. After all, why should you be paying more tax just because inflation is causing property prices to rise? This indexation advantage is principally introduced to diffuse the disadvantages caused by inflation.
- Benefits Under Section 54: This provision allows only for reducing your LTCG tax while selling a residential property. Plots and commercial properties, however, fall outside the jurisdiction of Section 54. Additionally, only individuals and Undivided Hindu Families (HUF) can apply for this benefit.
- Maximum LTCG Capping: The maximum LTCG limit for which the Section 54 exemption can be utilized is 2 crore INR. This provision, however, does not apply to traders and real estate agents as you can enjoy this benefit only once in your lifetime. So, get real, go ahead, and buy a new home. Enjoy the tax benefits, and then resell it for cash and relax.
- Section 54EC: Unlike section 54, all capital assets, including real estate, plots, and commercial properties come within Section 54EC. All taxpayers are entitled to benefit under this provision. However, the real estate should be held for at least three years to avail of benefits under section 54EC. Moreover, you should invest in designated bonds like the NHAI (National Highways Authority of India) bonds or the REC (Rural Electrification Corporation) bonds with a lock-up period of 5 years within six months following the sales transaction.
- Section 54F: Capital assets other than plots, commercial real estate, and real estate are governed by this provision. The difference between Section 54F and Section 54 is that the full sale value of the original real estate is applicable to purchasing a new ‘residential’ property alone.
However, the new property needs to be purchased within two years following the sale of the original property. Moreover, properties purchased one year before the sale of the actual property can also be used for this purpose. The period in these circumstances can be extended to 3 years. That is when the taxpayer prefers to build the home rather than buy one.
Conduct Research on Your Dream Home
Are you looking to buy an apartment? How many bedrooms will you need? What amenities are you willing to acquire and pay for? Where should your home be located? In the heart of the city or on the outskirts? Do you have the details sorted out?
We all look forward to owning a dream home. But having one requires thorough research based on various factors. Only then will you know exactly how much to save. It is also crucial to set a budget that is in line with your capacity to repay.
Now Is a Good Time to Buy a House
Investing in Real Estate is Lucrative! Being a real estate investor holds no boundaries. You can go for all that falls within your budget and terms of negotiation. You can be as flexible and creative as the transaction requires you to be since there are no rules carved in stone.
Investing in Gated Community Apartments
Investing in a gated community apartment is a great option when buying real estate. It is more worthy than the amount you are paying to acquire one.
Gated community apartments have evolved over the years. They are in vogue nowadays. More and more home-buyers now prefer to stay in serene and tranquil localities. Gated communities are well equipped with all the modern facilities and conveniences. They offer privacy where residents can enjoy and have access to a hassle-free living experience.
Invest In Your Dream Home!
Vertex Pristine Gated Community Apartments in Kukatpally bring you more. Featuring contemporary 2 & 3 BHK apartments with premium amenities within a gated community, Vertex Pristine is sprawled across 3.9 acres in one of the most convenient locations of Hyderabad. With easy access to the IT Hubs, it is in close proximity to the Metro Station, JNTU, international schools, popular shopping malls, and the best hospitals.
Enrich your lifestyle at the most sought-after address in the IT Capital City of Southern India. Strike a perfect balance between work, life, and play. Build a better tomorrow. Come Home to Vertex Pristine!
Real estate investment at a young age is a considerable way to bring about financial discipline. It is also desirable since the cash flow that you would get in the form of rental income from investing in residential property should be smartly managed.
Most people buy their first house between the age of 30 - 35 years. The typical first-time home buyer in India is usually 33 years of age.
Experts consider that the 30 - 36 age group is most suitable for investing in real estate. It is because most individuals at that age would have saved up to 30 to 40 percent for the home loan down payment.