The Benefits of Investing in Real Estate at a Young Age
Most people consider a house their biggest investment in life. Though, there is a lot more to real estate investing than that…
Since ancient times we've lived in houses and rented them out (hence real estate has been here for centuries).
But studies show that real estate investing came into mainstream consciousness during the 1980s (Source: Shermanbridge), so that means real estate investing, as a means of wealth creation for the common man, is fairly new.
Yet, it's considered as something "older" or "experienced" people do, which is a myth, because if you start out at a young age, it has many benefits.
So let us discuss some of those benefits…
Effective Cash Flow - While investing at a young age, you can make good use of the cash flow derived from the property.
Let's say you have a rental property, paid 10% as down payment and taken a mortgage for the rest of the payment.
The cash flow you get from the rental property can be used for the payment of interest, cover some of your expenses, pay some bills, etc.
This way you can learn to manage cash flow effectively if you start investing at an early age.
HIgh Appreciation - There are many factors that affect the appreciation of real estate, like location, renovations, and usage, but real estate appreciates annually.
National appreciation values average around 3.5 to 3.8 percent per year, (Source: Sfgate) and that's just an average for housing properties.
The different types of properties, like residential, commercial and industrial properties, all appreciate at different rates
All in all, there's a very low chance that you will lose money if you invest in real estate, and that's an assurance/security that many youngsters want in life.
Physical Value - With rising costs of properties in major cities and the emergence of digital assets like NFTs and cryptocurrencies, popular attention seems to be trending away from physical assets.
But the value of real estate is at an all-time high, and while it is more common for millennials and GenY to gravitate towards digital assets, you can take advantage of that. Compared to digital assets, an investment in real estate is extremely stable. Physical value like real estate will never be replaced by anything, not to mention, it can be used as security against loans and credit.
Increase Your Credit Score - As a real estate investor you can greatly increase your credit score by paying off the loans on the properties.
As a young person a good credit score is very important, because it can get you secure loans easily for business and future investments, it builds your credibility among institutions and can help you get tax benefits.
You reap the benefits of increased credit score only iif you take a mortgage or property loan. If you have enough capital to invest in real estate without any credit, that's another story.
Tax Benefits - This is one of the best benefits, especially for young, salaried people, because income tax can take a big chunk out of most people’s hard-earned money.
The biggest tax benefit you can get from real estate investing is ‘depreciation’, because depreciation is deductible.
Other benefits include deductible interest on home loans, tax benefits on repayment of principal, etc. (Source: Indiabulls)
Considering that there are a lot of other assets out there, like stocks, bonds, mutual funds, NFTs and cryptocurrencies, why should you choose real estate over other assets?
Let us compare real estate investing with its biggest competitor - Investing in stocks.
Advantages of Real Estate over Stocks
Consistent Returns - If you're investing in real estate for the long term, it is more likely to give you reliable and consistent returns compared to stocks.
This is because most people are not patient or educated enough to invest wisely in the stock market and end up losing more than they make.
But in real estate, it is easier to be patient because they're regularly getting rent as a return on their investment.
Security - Some people consider real estate more secure as compared to stocks, and some consider the opposite. There's no correct answer to this, but here's a comparison:
If you're a real estate investor and you've done enough research on the property you're about to buy, the most likely risky situation you can find yourself in would be an emergency repair.
If you're a stock market investor and again, you've done enough research on the stocks you're about to buy, the most likely risky situation could be the value dropping in a market burst.
So, when it comes to risk, real estate is, by far, the better option.
Taxation - As mentioned before, real estate provides many tax benefits while stock market provides none.
This is because of the inherent features of the stock market. Most people make money off the stock market by buying shares for a price and selling it for a higher price than they bought it for.
The income investors earn from this is taxable (Usually STCG - 35% and LTCG about 20%), and that tax is much more frequent as compared to real estate.
However, if you flip real estate, that too falls under either STCG (Short-term capital gains) or LTCG (Long-term capital gains), and that's taxable.
Now, if you're convinced and ready to invest in real estate, here is how you can start…
An Exciting New Real Estate Investment Opportunity In North Bengaluru
The Arcade at Brigade Orchards is a commercial property, with office spaces ideal for travel agents, courier offices, law firms, architects, CA and accounting offices, salons, beauty parlours, IT start-ups and even corporate offices/headquarters.
One of the most ambitious and promising projects from Brigade Group, it is strategically located in the heard of fast developing Devanahalli. A blooming new commercial landmark in North Bangalore, The Arcade is just 15 minutes away from the International Airport and is in close proximity to all major banks, hospitals, railway stations, supermarkets, and malls. It is attached to the nearby residential society, Brigade Orchards, and caters to over 10,000 families in the neighbouring catchment area.
You can get more details here.
Note - All the information provided in this article is merely a calculated suggestion to help you start investing early in life.
None of this information is meant to be any kind of legal or investing advice, so you are advised to consult experts in those fields before proceeding.