Investments in Real Estate, not very Realistic
Home Sweet Home. It’s such a secured feeling to own land and have your property on it. The pride is immense and overwhelming.
Brokers also use these emotional flavours to sell properties. The ease with which one gets a loan these days has lead the masses to invest in real estate easily, but not wisely!!
We have heard our elders say, “Invest in real estate, the future value of the property will earn you a fortune”.
Is this really true?
Here are 6 reasons not to invest in Real Estate.
- Low Liquidity:
We buy property with the hope to sell it at a higher cost. But what if an emergency arises and we want liquid cash immediately. Remember your urgency in selling a property is a treat to a potential buyer. Because, your dire need for cash would lead you in selling your property at a lower price than its true value.
- Low returns
Most real estate investments fetch you the same amount of return as that of Fixed Deposits. Lines from Nishant Agarwal (managing partner and head (family office), ASK Wealth Advisors )“Considering the rising interest rates and high maintenance cost and tax on rentals and capital gains, I would not suggest investment in physical real estate”.There is no guarantee that you would find occupancy if you are depending on getting income in terms of rent.
Which means, it’s obvious you’re not getting index-beating returns..
I remember my dad saying “20 years before if I had bought this house in Kammanhalli, I would have been a crorepati today”. Why?
Because rates increase in real estate depending on the property’s location not on how much you spend on the house, or how does the property look, which makes real estate an unpredictable asset class.
- Tracking is a pain.
Mutual Funds are managed by Professional Fund Managers, you have apps to give you alerts, even if you owned more than one scheme.
But how would you track real estate? How do you know that the broker dealing with the property is not a fraud? How would you track your property? You can’t track it daily, can you?
- Government Regulation
But the recent disruption announced by our Prime Minister, through “Demonetisation” has curbed the circulation of Black Money by stripping the status of our currency unit.
People don’t even let properties on lease these days, then forget buying a property. Thus reducing the demand of real estate in the market.
- Additional expenses.
You need to shell out a bomb to buy a property. Many opt for loans. But in addition, there are other expenses that come along with a property:
- Maintenance charges
- Finding a tenant
- Commission to brokers
- Utility Bills
This is exhaustive both financially and physically.
The next time you want to Invest in Real Estate, Think!!
There are better options to invest such as Mutual Funds. Direct Plans, SIPs, Gold Funds or Equity Mutual Funds help you with wealth creation in the long term. Use “Finity” to discover, track and invest in Mutual Funds.